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Top managers of Movie Street are alarmed by their operating losses. They are considering dropping the DVD product line. Company accountants have prepared the following analysis to help make this decision B (Click the icon to view the analysis.) Total fixed costs will not change if the company stops selling DVDs. Requirements Requirement 1. Prepare an incremental analysis to show whether Movie Street should drop the DVD product line. Will dropping the DVDs add $32,000 to operating income? Explain. (Enter a zero, "0", in an input box if there is no expected change in the expense. Use parentheses or a minus sign for an expected decrease in operating income.) Movie Street Analysis of Dropping the DVD Product Line Expected decrease in revenues Expected decrease in expenses. Variable expenses Fixed expenses Total expected decrease in expenses Expected increase (decrease) in operating income Decision Requirement 2. Assume that Movie Street can avoid 532.000 of fixed expenses by dropping the DVD product lin (these costs are direct fixed costs of the DVD product line). Prepare an incremental analysis to show whether Movie Street should stop se ng DVDs (Enter a zero, "0", in an input box if there is no expected change in the expense. Use parentheses or a minus sign for an expected decrease in operating income.) Movie Street Analysis of Dropping the DVD Product Line Expected decrease in revenues Expected decrease in expenses Variable expenses Foxed expenses Total expected decrease in expenses Expected increase (decrease in operating income Decision because, assuming $32,000 of fixed expenses attributable to the DVD product line can be avoided, the product's incremental revenues its incremental costs Requirement 3. Now, assume that all $62,000 of fixed costs assigned to DVDs are direct fixed costs and can be avoided if the company stops selling DVDs. However, marketing has concluded that Blu-ray disc sales would be adversely affected by discontinuing the DVD line (retailers want to buy both from the same supplier). Blu-ray disc production and sales would decline 10%. What should the company do? Prepare an incremental analysis. (Enter a zero, "0", in an input box if there is no expected change in the expense. Use parentheses or a minus sign for an expected decrease in operating income.) Movie Street Analysis of Dropping the DVD Product Line Expected decrease revenues Expected decrease in expenses Variable expenses Fixed expenses Total expected decrease in expenses Expected increase (decrease) in operating income Lost contribution margin on Blu-ray discs Net expected increase (decrease) in operating income because, assuming that all $62,000 of fixed costs assigned to the DVD product line can be avoided but that Blu-ray production and sales would decline 10%, the product's incremental revenues its Decision incremental costs Data table 1 Blu-ray Total Discs DVDs Sales revenue. $ 425,000 $ 241,000 305,000 $ 151,000 120,000 90,000 Variable expenses Contribution margin 184,000 154,000 30,000 Fixed expenses: Manufacturing 121,000 65,000 70,000 54,000 51,000 11,000 Marketing and administrative Total fixed expenses 186,000 124,000 62,000 $ (2,000) $ 30,000 $ (32,000) Operating income (loss)... Print Done Top managers of Movie Street are alarmed by their operating losses. They are considering dropping the DVD product line. Company accountants have prepared the following analysis to help make this decision (Click the icon to view the analysis.) Total fixed costs will not change if the company stops selling DVDs. Requirements Requirement 1. Prepare an incremental analysis to show whether Movie Street should drop the DVD product line will dropping the DVDs add $32,000 to operating income? Explain. (Enter a zero, "o", in an input box if there is no expected change i the expense. Use parentheses or a minus sign for an expected decrease in operating income.) Movie Street Analysis of Dropping the DVD Product Line Expected decrease in revenues Expected decrease in expenses. Variable expenses Fixed expenses Total expected decrease in expenses Expected increase (decrease) in operating income Decision