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Requirement 1. Prepare a differential analysis to show whether Video Street should drop the DVD product line. Begin by preparing a differential analysis to show whether Video Street 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 Decision: Requirement 2. Will dropping DVDs add $38,000 to operating income? Explain. It is V to conclude that dropping the DVD product line would add $38,000 to operating income. If the company drops the DVD product line, it incur fixed expenses allocated to the DVDs Top managers of Best Video 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.) Total fixed costs will not change if the company stops selling DVDs Read the requirements Data table Best Video Income Statement For the Year Ended December 31, 2024 Total Blu-ray Discs DVD Discs Net Sales Revenue $ 423,000 $ 302,000 $ 121,000 Variable Costs 242,000 150,000 92,000 Contribution Margin 181,000 152,000 29,000 Fixed Costs: Manufacturing 120,000 70,000 50,000 Selling and Administrative 74,000 59,000 15,000 1 Data table For the Year Ended December 31, 2024 Total Blu-ray Discs DVD Discs Net Sales Revenue 423,000 $ 302,000 $ 121,000 242,000 150,000 92,000 Variable Costs Contribution Margin 181,000 152,000 29,000 Fixed Costs: Manufacturing 120,000 70,000 50,000 Selling and Administrative 74,000 59,000 15,000 Total Fixed Costs 194,000 129,000 65,000 Operating Income (Loss) (13,000) $ 23,000 $ (36,000) $ 1 Requirements 1. Prepare a differential analysis to show whether Best Video should drop the DVD product line. 2. Will dropping DVDs add $36,000 to operating income? Explain

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