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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
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: (Click the icon to view the analysis.) Total fixed costs will not change if the company stops selling DVDs. Read the requirements. Requirement 1. Prepare a differential analysis to show whether Entertainment Plus should drop the DVD product line. Begin by preparing a differential analysis to show whether Entertainment Plus should drop the DVDs product line. (Enter decreases to profits with a parenth Expected decrease in revenues-Dropping DVDs Expected decrease in costs-Dropping DVDs Expected in operating income Requirements 1. Prepare a differential analysis to show whether Entertainment Plus should drop the DVD product line. 2. Will dropping DVDs add $44,000 to operating income? Explain. Print Done Data table Entertainment Plus Income Statement For the Year Ended December 31, 2024 Total Blu-ray Discs DVD Discs Net Sales Revenue 430,000 $ 307,000 $ 123,000 244,000 152,000 92,000 Variable Costs Contribution Margin 186,000 155,000 31,000 Fixed Costs: Manufacturing 129,000 71,000 58,000 Selling and Administrative 76,000 59,000 17,000 Total Fixed Costs $ 205,000 (19,000) $ 130,000 75,000 25,000 $ (44,000) Operating Income (Loss) Print Done
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