Top managers of Movie Street are alarmed by their operating losses. They are considering
E25-13 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
the Year Ended December 31, 2014
Total Blu-Ray Disc DVD Disc
and Administrative 67,000 52,000 15,000
Total Fixed Expenses 195,000 123,000 72.000
Operating Income (Loss) $(9,000) $32,000 $(41,000)
Total fixed costs will not change if the company
stops selling DVDs.
a differential analysis to show whether Movie Street should drop the DVD
dropping DVDs add $41,000 to operating income? Explain.
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