**Analysis of Movie Street's DVD Discontinuation Decision**Top managers of Movie Street are concerned about the company's operating losses and are contemplating discontinuing the DVD product line. The accounting team has provided an analysis to assist in the decision-making process.**Analysis Overview:**- **Expected Decrease in Revenues:** Enter the potential revenue loss from ceasing DVD sales.- **Expected Decrease in Costs:** - **Variable Costs:** Enter the potential savings in costs that vary with sales volume. - **Fixed Costs:** Enter potential savings in fixed costs, which Movie Street estimates to be $39,000 by discontinuing the DVD line.- **Expected Decrease in Total Costs:** Calculate the total cost savings from both variable and fixed cost reductions.- **Expected Change in Operating Income:** Calculate the net effect on operating income by balancing the decrease in revenues against the decrease in total costs.- **Decision:** Make a strategic decision based on the above analysis.**Data Table Explanation:**This section provides detailed figures from Movie Street's Income Statement for the year ending December 31, 2018. - **Net Sales Revenue:** - Total: $424,000 - Blu-ray Discs: $300,000 - DVD Discs: $124,000- **Variable Costs:** - Total: $248,000 - Blu-ray Discs: $153,000 - DVD Discs: $95,000- **Contribution Margin:** - Total: $176,000 - Blu-ray Discs: $147,000 - DVD Discs: $29,000- **Fixed Costs:** - **Manufacturing:** - Total: $130,000 - Blu-ray Discs: $74,000 - DVD Discs: $56,000 - **Selling and Administrative:** - Total: $60,000 - Blu-ray Discs: $50,000 - DVD Discs: $10,000- **Total Fixed Expenses:** - Total: $190,000 - Blu-ray Discs: $124,000 - DVD Discs: $66,000- **Operating Income (Loss):** - Total: $(14,000) - Blu-ray Discs:

Break-even analysis is a technique widely used by the production department. It helps to determine…

Top managers of Movie 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: E (Click the icon to view the analysis.) Assume that Movie Street can avoid $39,000 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 Movie Street should stop selling DVDS. (Enter decreases to revenues with a parentheses or minus sign.) Expected decrease in revenues Data Table Expected decrease in costs: Variable costs Fixed costs Movie Street Income Statement Expected decrease in total costs For the Year Ended December 31, 2018 Expected in operating income Total Blu-ray Discs DVD Discs Decision: Net Sales Revenue 424,000 $ 300,000 $ 124,000 248,000 153,000 95,000 Variable Costs Contribution Margin 176,000 147,000 29,000 Fixed Costs: Manufacturing 130,000 74,000 56,000 60,000 50,000 10,000 Selling and Administrative Total Fixed Expenses 190,000 124,000 66,000 $ (14,000) $ 23,000 $ (37,000) Operating Income (Loss)

Top managers of Movie 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: E (Click the icon to view the analysis.) Assume that Movie Street can avoid $39,000 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 Movie Street should stop selling DVDS. (Enter decreases to revenues with a parentheses or minus sign.) Expected decrease in revenues Data Table Expected decrease in costs: Variable costs Fixed costs Movie Street Income Statement Expected decrease in total costs For the Year Ended December 31, 2018 Expected in operating income Total Blu-ray Discs DVD Discs Decision: Net Sales Revenue 424,000 $ 300,000 $ 124,000 248,000 153,000 95,000 Variable Costs Contribution Margin 176,000 147,000 29,000 Fixed Costs: Manufacturing 130,000 74,000 56,000 60,000 50,000 10,000 Selling and Administrative Total Fixed Expenses 190,000 124,000 66,000 $ (14,000) $ 23,000 $ (37,000) Operating Income (Loss)

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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