VIDEO AVENUE Income Statement For the Year Ended December 31, 2018 Blu-ray Discs DVD Discs Total Net Sales Revenue $ 437,000 $ 308,000 $ 129,000 Variable Costs 250,000 154,000 96,000 Contribution Margin 187,000 154,000 33,000 Fixed Costs: Manufacturing 132,000 76,000 S6,000 Selling and Administrative 65,000 51,000 14,000 Total Fixed Expenses 197,000 127,000 70,000 Operating Income (Loss) S (10,000) S 27,000 5 (37,000)
VIDEO AVENUE Income Statement For the Year Ended December 31, 2018 Blu-ray Discs DVD Discs Total Net Sales Revenue $ 437,000 $ 308,000 $ 129,000 Variable Costs 250,000 154,000 96,000 Contribution Margin 187,000 154,000 33,000 Fixed Costs: Manufacturing 132,000 76,000 S6,000 Selling and Administrative 65,000 51,000 14,000 Total Fixed Expenses 197,000 127,000 70,000 Operating Income (Loss) S (10,000) S 27,000 5 (37,000)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
100%
Making decisions about dropping a product
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:
Total fixed costs will not change if the company stops selling DVDs.
Requirements
- Prepare a differential analysis to show Whether Video Avenue should drop the DVD Product fins.
- Will dropping DVDs add $37,000 to operating income? Explain.
![VIDEO AVENUE
Income Statement
For the Year Ended December 31, 2018
Blu-ray
Discs
DVD
Discs
Total
Net Sales Revenue
$ 437,000
$ 308,000
$ 129,000
Variable Costs
250,000
154,000
96,000
Contribution Margin
187,000
154,000
33,000
Fixed Costs:
Manufacturing
132,000
76,000
S6,000
Selling and Administrative
65,000
51,000
14,000
Total Fixed Expenses
197,000
127,000
70,000
Operating Income (Loss)
S (10,000)
S 27,000
5 (37,000)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffa5b9b85-4a95-4114-b5b5-717384e8c35b%2F720a342c-3d3a-4159-9b47-667ccadeaa6b%2F36ixylv.png&w=3840&q=75)
Transcribed Image Text:VIDEO AVENUE
Income Statement
For the Year Ended December 31, 2018
Blu-ray
Discs
DVD
Discs
Total
Net Sales Revenue
$ 437,000
$ 308,000
$ 129,000
Variable Costs
250,000
154,000
96,000
Contribution Margin
187,000
154,000
33,000
Fixed Costs:
Manufacturing
132,000
76,000
S6,000
Selling and Administrative
65,000
51,000
14,000
Total Fixed Expenses
197,000
127,000
70,000
Operating Income (Loss)
S (10,000)
S 27,000
5 (37,000)
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