Top managers of

Movies and More

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:

Entertainment Plus

Income Statement

For the Year Ended December 31, 2024

Total

Blu-ray Discs

DVD Discs

Net Sales Revenue

$424,000

$302,000

$122,000

Variable Costs

259,000

159,000

100,000

Contribution Margin

165,000

143,000

22,000

Fixed Costs:

Manufacturing

120,000

69,000

51,000

Selling and Administrative

71,000

53,000

18,000

Total Fixed Costs

191,000

122,000

69,000

Operating Income (Loss)

$(26,000)

$21,000

$(47,000)

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Assume that

Movies and More

can avoid

$36,000

of fixed costs by dropping the DVD product line (these costs are direct fixed costs of the DVD product line). Prepare a differential analysis to show whether

Movies and More

should stop selling DVDs. (Enter decreases to revenues with a parentheses or minus sign.)

	Expected decrease in revenues
	Expected decrease in costs:
	Variable costs
	Fixed costs
	Expected decrease in total costs
	Expected		in operating income