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Top managers of Movie Plus are alarmed by their operating losses. They are considering dropping the DVD product line. Company accountants have prepared the following
Top managers of Movie 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 an incremental analysis to show whether Movie Plus should discontinue the DVD product line. Will discontinuing DVDs add $36,000 to operating income? Explain. Enter a 0" in an input box if there is no expected change as a result of discontinuing DVDs is this scenario.) Data Table Incremental Analysis for Discontinuation Decision Total Contribution margin lost if DVDs are discontinued Less: Fixed cost savings if DVDs are discontinued Movie Plus operating income if DVDs are discontinued Product Line Contribution Margin Income Statement For the Year Product lines Blu-ray Discs DVDs Company Total 303,000 s 122,000 s Sales revenue 425,000 159,000 82,000 241,000 Less: Variable expenses 144,000 40,000 s Contribution margin 184.000 Less fixed expenses: Choose from any list or enter any number in the input fields and then click Check Answer. 140,000 Manufacturing 79,000 61,000 57,000 15,000 72,000 Marketing and administrative remaining 8,000 36,000) (28,000) operating income (loss)
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