MSI's educational products are currently sold without any supplemental materials. The company is considering the inclusion of instructional materials such as an overhead slide presentation, potential test questions, and classroom bulletin board materials for teachers. A summary of the expected costs and revenues for MSI's two options follows: CD Only 32,000 units $ 28.00 CD with Instructional Materials 32,000 units $ 43.00 Estimated demand Estimated sales price Estimated cost per unit $ 5.25 6.50 6.50 $5.75 9.50 9.75 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit manufacturing cost Additional development cost 6.00 6.00 $ 31.00 $105,000 $ 24.25 Required: 1. Based on the given data, compute the increase or decrease in profit that would result if instructional materials were added to the CDs. 2. Should MSI add the instructional materials or sell the CDs without them? 3-a. Suppose that the higher price of the CDs with instructional materials is expected to reduce demand to 22,000 units. Complete the table given below based on Requirement 1 and 2 data 3-b. Should MSI add the instructional materials or sell the CDs without them?
MSI's educational products are currently sold without any supplemental materials. The company is considering the inclusion of instructional materials such as an overhead slide presentation, potential test questions, and classroom bulletin board materials for teachers. A summary of the expected costs and revenues for MSI's two options follows: CD Only 32,000 units $ 28.00 CD with Instructional Materials 32,000 units $ 43.00 Estimated demand Estimated sales price Estimated cost per unit $ 5.25 6.50 6.50 $5.75 9.50 9.75 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit manufacturing cost Additional development cost 6.00 6.00 $ 31.00 $105,000 $ 24.25 Required: 1. Based on the given data, compute the increase or decrease in profit that would result if instructional materials were added to the CDs. 2. Should MSI add the instructional materials or sell the CDs without them? 3-a. Suppose that the higher price of the CDs with instructional materials is expected to reduce demand to 22,000 units. Complete the table given below based on Requirement 1 and 2 data 3-b. Should MSI add the instructional materials or sell the CDs without them?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Answer all three questions including (3A and 3B!)
Transcribed Image Text:MSI's educational products are currently sold without any supplemental materials. The company iS considering the inclusion of
instructional materials such as an overhead slide presentation, potential test questions, and classroom bulletin board materials for
teachers. A summary of the expected costs and revenues for MSI's two options follows:
CD Only
32,000 units
$28.00
CD with
Instructional
Materials
32,000 units
$ 43.00
Estimated demand
Estimated sales price
Estimated cost per unit
Direct materials
$5.25
5.75
9.50
9.75
6.50
6.50
6.00
$ 24.25
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Unit manufacturing cost
Additional development cost
6.00
$ 31.00
$105,000
Required:
1. Based on the given data, compute
e increase or decrease in profit that would result if instructional materials were added to the
CDs.
2. Should MSI add the instructional materials or sell the CDs without them?
3-a. Suppose that the higher price of the CDs with instructional materials is expected to reduce demand to 22,000 units. Complete the
table given below based on Requirement 1 and 2 data:
3-b. Should MSI add the instructional materials or sell the CDs without them?
Complete this question by entering your answers in the tabs below.
Reg 1
Req 2
Req 3A
Req 3B
Based on the given data, compute the increase or decrease in profit that would result if instructional materials were added to
the CDs.
CD with Instructional
Materials
CD Only
Incremental
CSD
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