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Top managers of Video Street are alarmed by their operating losses. They are considering dropping the DVD product line. Company accountants have prepared the following
Top managers of Video Street 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.) Assume that Video Street can avoid $42,000 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 Video Street 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 Data Table Expected decrease in total costs Expected in operating income Video Street Income Statement For the Year Ended December 31, 2024 Total Blu-ray Discs DVD Discs $ 425,000 $ 301,000 $ 124,000 256,000 157,000 99,000 Net Sales Revenue 169,000 144,000 25,000 Variable Costs Contribution Margin Fixed Costs: Manufacturing 124,000 60,000 70,000 49,000 54,000 11,000 Selling and Administrative Total Fixed Costs 184,000 119,000 65,000 $ 25,000 $ (15,000) $ Operating Income (Loss) (40,000) Print Done
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