$\backslash$table$[[,$A B$,$C$],[$Question $2-$ Incremental Analysis $-$ Version A $(9$ marks$),,]]$

Parrino has three product lines in its retail stores: books, DVDs$,$ and music. Results of the fourth quarter are presented below :

$3$

$4$

$5$

$6$

$7$

$8$

$9$

Net income $($loss$)$

Music

DVDs

Total

Revenue

Variable costs

Direct fixed costs

Common fixed costs

$10$

$11$ Demand of individual products is not affected by changes in other product lines. Direct fixed costs are costs associated with the specific product line. They will be eliminated if a product line is discontinued. The common fixed costs are allocated based on revenue and will be incurred regardless of how many product lines are

$12$ carried.

$13$ Required:

a$)$ Prepare an incremental analysis of the effect of dropping the DVDs product line. Should DVDs be

$14$ dropped? $(7$ marks$)$

$15$

Sheet$1$ New..$\mathrm{.}12$

carried.

$13$ Required:

a$)$ Prepare an incremental analysis of the effect of dropping the DVDs product line. Should DVDs be $14$ dropped? $(7$ marks$)$

$15$

$16$

$17$

$18$

$19$

$20$

$21$

$22$

$23$

$24$

$25$

$26$

$27$

$70$

b$)$ Comment on two non$-$financial factors to be considered by the company in the keep$/$drop situatio

Sheet$1$ New..$\mathrm{.}25$

$26$

$27$

b$)$ Comment on two non$-$financial factors to be considered by the company in the keep$/$drop situation. $($a marks$)$

$29$

$30$

$31$

$32$

$33$

$34$

$35$

$36$

$37$ End of Question.

$38$ SAVE YOUR WORK!

$\backslash$table$[[39],[40]]$