J umuiysis. 58-21A Decide whether + Decide whether to drop a product line (Learning Objective 5) managers of Video Avenue are alarmed by their operating losses. They are dering dropping the DVD product line. Company accountants have prepared the following analysis to help make this decision. Total fixed costs will not change if the company stops selling DVDs. Total $420,000 230,000 190,000 Blu-ray Discs $300,000 150,000 150,000 DVDs $120,000 80,000 40,000 Sales revenue... Variable expenses. Contribution margin..... Fixed expenses:..... Manufacturing.... Marketing and administrative.......... Total fixed expenses.. Operating income (loss)........... 125,000 85,000 205,000 $(20,000) 70,000 55,000 125,000 $ 25,000 55,000 30,000 85,000 $(45,000) Requirements 1. Prepare an in 2. Assume tha 3. Now, assume can be avoided that Blu-ray disc Prepare an incremental analysis to show whether Video Avenue should drop the DVD oduct line. Will dropping DVDs add to operating income? Explain. sume that Video Avenue can avoid $30,000 of fixed expenses by dropping the DVD wuct line. (These costs are direct fixed costs of the DVD product line.) Prepare an emental analysis to show whether Video Avenue should stop selling DVDs. assume that all $70.000 of fixed costs assigned to DVDs are direct fixed costs and avoided if the company stops selling DVDs. However, marketing has concluded u-ray disc sales would be adversely affected by discontinuing the DVD line aners want to buy both from the same supplier.) Blu-ray disc production and sales " decline 10%. What should the company do would decline