Top managers of Video Avenue 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: VIDEO AVENUE Income Statement For the Year Ended December 31, 2018 Blu-ray Discs DVD Discs Total Net Sales Revenue Variable Costs $437,000 250,000 187,000 $308,000 154,000 154,000 $ 129,000 96,000 33,000 Contribution Margin Fixed Costs: Manufacturing Selling and Administrative Total Fixed Expenses Operating Income (Loss) 132,000 65,000 197,000 $ (10,000) 76,000 51,000 127,000 $ 27,000 56,000 14,000 70,000 $ (37,000) Assume that Video Avenue can avoid $39,000 of selling and administrative fixed costs by dropping the DVD product line but the manufacturing fixed costs are unavoidable. Requirements 1. Prepare a differential analysis to show whether Video Avenue should stop selling DVDs. 2. Prepare contribution margin income statements to show Video Avenue's total operating income under the two alternatives: (a) with the DVD product line and (b) without the DVD product line. Compare the difference between the two alternatives to your answer to Requirement 1