Hello I need help with the following Top managers of Videos

Hello I need help with the following.

Top managers of Videos N More 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 Requirement 1. Prepare an incremental analysis to show whether Videos N -More should discontinue the DVD product line. Will discontinuing DVDs add $32,000 to operating income? Explain. (Enter a \"0\" in an input box if there is no expected change as a result of discontinuing DVDs is this scenario.) Incremental Analysis for Discontinuation Decision Total Contribution margin lost if DVDs are discontinued Less: Fixed cost savings if DVDs are discontinued Operating income Decision if DVDs are discontinued ? to conclude that discontinuing DVDs would add $32,000 to operating income. If the company discontinues the DVD product line, it V incur fixed expenses allocated to DVDs. IS Requirement 2. Assume that the company can avoid S33,000 of fixed expenses by discontinuing the DVD product line (these costs are direct fixed costs of the DVD product line). Prepare an incremental analysis to show whether the company should stop selling DVDs. (Enter a \"0\" in an input box if there is no expected change as a result of discontinuing DVDs is this scenario.) Incremental Analysis for Discontinuation Decision Total Contribution margin lost if DVDs are discontinued Less: Fixed cost savings if DVDs are discontinued

Solution

(1)

Contribution Margin lost if DVD’s are discontinued

36000

Less:- Fixed cost saving if DVD’s are discontinued

0

Operating Income DECREASED if DVD’s are dicontinued

36000

Decision = Not Discontinue

(2)

Contribution Margin lost if DVD’s are discontinued

36000

Less:- Fixed cost saving if DVD’s are discontinued

33000

Operating Income DECREASED if DVD’s are dicontinued

3000

Decision = Not Discontinue

(3)

DVD Contribution Margin lost if DVD’s are discontinued

36000

Blue-Ray Contribution Margin lost if DVD’s are discontinued (148000 * 10%)

14800

Less:- Fixed cost saving if DVD’s are discontinued (55000 + 13000)

68000

Operating Income INCREASED if DVD’s are dicontinued

(17200)

Decision = Discontinue

Contribution Margin lost if DVD’s are discontinued	36000
Less:- Fixed cost saving if DVD’s are discontinued	0
Operating Income DECREASED if DVD’s are dicontinued	36000