Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Please answer asap Top managers of Movie Street are alarmed by their operating losses. They are considering dropping the DVD product line. Company accountants have
Please answer asap
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.) Totai fixed costs will not change if the company stops selling DVDs. Requirements Decision: DVDs. It is to conclude that dropping DVDs would add to operating income. If Movie Street drops the DVD product line, it incur $ in fixed expenses allocated to DVDs. Requirement 2. Assume that Movie Street can avoid $35,000 of fixed expenses by dropping the DVD product line. (These costs are direct fixed costs of the DVD product line.) Prepare an incremental analysis to show whether Movie Street should stop selling DVDs. (Use parentheses or a minus sign to enter a decrease in operating income.) Decision: because the product's incremental revenues its incremental costs. Analysis Decision: DVDs. It is to conclude that dropping DVDs would add to operating incom Movie Strt ict line, it incur $ in fixed expenses allocated to DVDs. Requiremi le Street can avoid $35,000 of fixed expenses by dropping the DVD product line. (Thes Drop costs of the DVD product line.) Prepare an incremental analysis to show whe Movie Stre IVDs. (Use parentheses or a minus sign to enter a decrease in operating ing Decision: because the product's incremental revenues its incremental costs Requirement 2. Assume that Movie ;,000 of fixed expenses by dropping the DVD product line. (These costs are direct fixed cc correct Jct line.) Prepare an incremental analysis to show wheth Movie Street should stop selling DV s or a minus sign to enter a decrease in operating incon Decision: because the product's incremental revenues its incremental costs. Decision: DVDs. It is to conclude that dropping DVDs would add to operating Movie Street drops the DVD product line, it incur $ in fixed expenses allocated to DVDs. Requirement 2. Assume that Movie Street c ixed expenses by dropping the DVD pro line. (These costs are direct fixed costs of t ) Prepare an incremental analysis to shov se in operatin Decision: because the product's incremental revenues its incremental Decision: because the product's incremental revenues 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: because the product's incremental revenues its incremental costs. Requirement 3. Now, assume that $91,000 of fixed costs assigned to DVDs d can be avoided if the company stops selling DVDs. However, marketing has concluded that be adversely affected by discontinuing the DVD line. (Retailers want to buy both from the lisc production and sales would decline 8%. What should the company do? are less than Prepare an incremental analysis. (Use parentheses or a minus sign to enter are equal to Movie Street Analysis of Dropping the DVD Product Line exceed Expected decrease in revenues Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started