Please kindly open the attachment and enlarge it to view. all data included.

Top managers of Entertainment Plus 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 Entertainment Plus should drop the DVD product line. Will dropping the DVDs add $18,000 to operating income? Explain. (Enter a zero, "O", 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.) Entertainment Plus 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: It is V to conclude that dropping DVDs would add $18,000 to operating income. If the company drops the DVD product line, it incur $in fixed expenses allocated to DVDs. Fnter any number in the edit fields and then continue to the next question Requirement 2. Assume that Entertainment Plus can avoid $18,000 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 Entertainment Plus should stop selling DVDs. (Enter a zero, "O", 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.) Entertainment Plus 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: V because, assuming $18,000 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 $64,000 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, "O", in an input box if there no expected change in the expense. Use parentheses or a minus sign for an expected decrease in operating income.) Entertainment Plus 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 Decision: because, assuming that all $64.000 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 incremental costs. Requirements x Data Table -X Blu-ray Discs Total DVDs Sales revenue. $ 1. Prepare an incremental analysis to show whether Entertainment Plus should drop the DVD product line. Will dropping the DVDs add $18,000 to operating income? Explain. 2. Assume that Entertainment Plus can avoid $18,000 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 Entertainment Plus should stop selling DVDs 3. Now, assume that all $64,000 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? 428,000 $ 239,000 302.000 $ 159,000 126,000 80.000 Iput bo 189.000 143,000 46,000 Variable expenses Contribution margin Fixed expenses Manufacturing Marketing and administrative 47.000 Print Done 123,000 76.000 76.000 59,000 17,000 Variable expenses Total fixed expenses 199,000 135,000 64,000 Fixed expenses $ (10,000) $ 8,000 $ (18,000) Operating income (loss) Total expected decrease in expenses