Requirements:1.Prepare a differential analysis to show whetherMovies are Bestshould drop the DVD product line.2.Will dropping DVDs add$44,000to operating income? Explain. Top managers of Movies are Best are alarmed by their operating losses. They are considering dropping the DVD product line. Company accountants have preparethe following analysis to help make this decision:(Click the icon to view the analysis.)Total fixed costs will not change if the company stops selling DVDs.Read the requirements.Requirement 1. Prepare a differential analysis to show whether Movies are Best should drop the DVD product line.Begin by preparing a differential analysis to show whether Movies are Best should drop the DVDs product line. (Enter decreases to profits with a parentheses orminus sign.)Expected decrease in revenues-Dropping DVDsExpected decrease in costs-Dropping DVDsExpectedin operating income Data tableNet Sales RevenueVariable CostsContribution MarginFixed Costs:ManufacturingSelling and AdministrativeTotal Fixed CostsOnorating Incoma (1 ona)$Total Blu-ray Discs DVD Discs309,000 $120,000155,00093,00027,000429,000 $248,000181,000131,00074,000205,000$ (24,000) $154,00077,00057,000134,00020,000 $54,00017,00071,000(44,000)

The differential analysis is performed to analyse the effect of various alternatives available to…

Answered: Requirements: 1. Prepare a…

Requirements: 1. Prepare a differential analysis to show whether Movies are Best should drop the DVD product line. 2. Will dropping DVDs add $44,000 to operating income? Explain.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Requirements:

1.	Prepare a differential analysis to show whether Movies are Best should drop the DVD product line.
2.	Will dropping DVDs add $44,000 to operating income? Explain.

Top managers of Movies are Best are alarmed by their operating losses. They are considering dropping the DVD product line. Company accountants have prepare
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 Movies are Best should drop the DVD product line.
Begin by preparing a differential analysis to show whether Movies are Best should drop the DVDs product line. (Enter decreases to profits with a parentheses or
minus sign.)
Expected decrease in revenues-Dropping DVDs
Expected decrease in costs-Dropping DVDs
Expected
in operating income

Data table
Net Sales Revenue
Variable Costs
Contribution Margin
Fixed Costs:
Manufacturing
Selling and Administrative
Total Fixed Costs
Onorating Incoma (1 ona)
$
Total Blu-ray Discs DVD Discs
309,000 $
120,000
155,000
93,000
27,000
429,000 $
248,000
181,000
131,000
74,000
205,000
$ (24,000) $
154,000
77,000
57,000
134,000
20,000 $
54,000
17,000
71,000
(44,000)

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