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Problem #2. Making dropping a product decisions_Movie Street




Question;Problem;#2. Making dropping a product decisions;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: 1.;$(31,000);MOVIE STREET;Income Statement;For the Year Ended December 31, 2014;Total Blu-ray Discs DVD Discs;Sales;Revenue $432,000 $ 305,000 $ 127,000;Variables 246,000 150,000 96,000;Contribution;Margin 186,000 155,000 31,000;Fixed;Cost;Manufacturing;128,000 71,000 57,000;Selling & Administrative;67,000 52,000 15,000;Total;Selling Expenses 195,000 123,000 72,000;Operating;Income (Loss) $(9000) $32,000 $(41,000);Total;fixed costs will not change if the company stops selling DVDs.;Requirements;1.;Prepare a differential analysis to show whether Movie Street should drop the DVD;product line.;2.;Will dropping DVDs add $41,000 to operating income? Explain.


Paper#37458 | Written in 18-Jul-2015

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