Refer to Exercise E25- 13. Assume that Movie Street can avoid $ 41,000 of fixed expenses by dropping the DVD product line (these costs are direct fixed costs of the DVD product line). Prepare a differential analysis to show whether Movie Street should stop selling DVDs.

E25-13

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MOVIE STREET Income Statement For the Year Ended December 31, 2014 Blu-ray Discs $ 305,000 150,000 155,000 DVD Discs Sales Revenue Variable Costs Contribution Margin Fixed Costs Total 432,000 246,000 186,000 127,000 96,000 31,000 Manufacturing Selling and Administrative 128,000 67,000 195,000 5 (9,000) 71,000 52,000 123,000 32,000 (41,000) 57,000 15,000 72,000 Total Fixed Expenses Operating Income (Loss