Learning objective 3 E25-13 Making decisions about dropping a product Top managers of Video Avenue...
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Learning objective 3 E25-13 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: 1. $(33,000) VIDEO AVENUE Income Statement For the Year Ended December 31, 2018 Blu-ray Discs 308,000 129,000 154,000 154,000 DVD Discs Net Sales Revenue Variable Costs Contribution Margin Fixed Costs: Total 437,000 250,000 187,000 96,000 33,000 76,000 51,000 127,000 27,000 (37,000) Manufacturing Selling and Administrative 132,000 65,000 197,000 S (10,000) 56,000 14,000 70,000 Total Fixed Expenses Operating Income (Loss) Total fixed costs will not change if the company stops s Requirements 1. Prepare a differential analysis to show whether Video Avenue should drop the elling DVDs. DVD product line. 2. Will dropping DVDs add $37,000 to operating income? Explain
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