Top managers of Movie Street are alarmed by their operating losses. They are considering dropping the DVD
Question:
Top managers of Movie Street are alarmed by their operating losses. They are Âconsidering dropping the DVD product line. Company accountants have Âprepared the following analysis to help make this decision:
Total fixed costs will not change if the company stops selling DVDs.
Requirements
1. Prepare a differential analysis to show whether Movie Street should drop the DVD product line.
2. Will dropping DVDs add $ 41,000 to operating income? Explain.
Transcribed Image Text:
MOVIE STREET Income Statement For the Year Ended December 31, 2014 Blu-ray Discs DVD Discs Sales Revenue Variable Costs Contribution Margin Fixed Costs Total 432,000 246,000 186,000 $ 305,000 127,000 96,000 31,000 150,000 155,000 Manufacturing Selling and Administrative 57,000 15,000 72,000 $ (9,000) 32,000 (41,000) 128,000 67,000 195,000 71,000 52,000 123,000 Total Fixed Expenses Operating Income (Loss
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Requirement 1 Expected decrease in revenue 127000 Expected decrease i...View the full answer
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Related Book For
Horngrens Financial and Managerial Accounting
ISBN: 978-0133255584
4th Edition
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura
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