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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 with Instructional CD Only 50,000 units $ 20.00 Materials 50,000 units $ Estimated demand Estimated sales price Estimated cost per unit Direct materials 35.00 $ 1.25 1.75 5.50 5.75 2.00 15.00 65,000 Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit manufacturing cost Additional development cost 2.50 2.50 2.00 $ 8.25 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. CD with Instructions CD Only Incremental Materials Sales Revenue Variable Costs Contribution Margin Additional Development Costs Differential Profit (Loss) 3-a. Suppose that the higher price of the CDs with instructional materials is expected to reduce demand to 32,000 units. Complete the table given below based on Requirement 1 and 2 data. CD with Instructions Materials Incremental CD Only Sales Revenue Variable Costs Contribution Margin Additional Development Costs Differential Profit (Loss) 3-b. Should MSI add the instructional materials or sell the CDs without them? O Add the Instructional Materials O Sell the CDs without Instructional Materials

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 with Instructional CD Only 50,000 units $ 20.00 Materials 50,000 units $ Estimated demand Estimated sales price Estimated cost per unit Direct materials 35.00 $ 1.25 1.75 5.50 5.75 2.00 15.00 65,000 Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit manufacturing cost Additional development cost 2.50 2.50 2.00 $ 8.25 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. CD with Instructions CD Only Incremental Materials Sales Revenue Variable Costs Contribution Margin Additional Development Costs Differential Profit (Loss) 3-a. Suppose that the higher price of the CDs with instructional materials is expected to reduce demand to 32,000 units. Complete the table given below based on Requirement 1 and 2 data. CD with Instructions Materials Incremental CD Only Sales Revenue Variable Costs Contribution Margin Additional Development Costs Differential Profit (Loss) 3-b. Should MSI add the instructional materials or sell the CDs without them? O Add the Instructional Materials O Sell the CDs without Instructional Materials

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Ch. 7 Homework

Please solve and answer the information and question on the 2 attachments.

 

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 with Instructional CD Only 50,000 units $ 20.00 Materials 50,000 units $ Estimated demand Estimated sales price Estimated cost per unit Direct materials 35.00 $ 1.25 1.75 5.50 5.75 2.00 15.00 65,000 Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit manufacturing cost Additional development cost 2.50 2.50 2.00 $ 8.25 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. CD with Instructions CD Only Incremental Materials Sales Revenue Variable Costs Contribution Margin Additional Development Costs Differential Profit (Loss)
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 with Instructional CD Only 50,000 units $ 20.00 Materials 50,000 units $ Estimated demand Estimated sales price Estimated cost per unit Direct materials 35.00 $ 1.25 1.75 5.50 5.75 2.00 15.00 65,000 Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit manufacturing cost Additional development cost 2.50 2.50 2.00 $ 8.25 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. CD with Instructions CD Only Incremental Materials Sales Revenue Variable Costs Contribution Margin Additional Development Costs Differential Profit (Loss)
3-a. Suppose that the higher price of the CDs with instructional materials is expected to reduce demand to 32,000 units. Complete the table given below based on Requirement 1 and 2 data. CD with Instructions Materials Incremental CD Only Sales Revenue Variable Costs Contribution Margin Additional Development Costs Differential Profit (Loss) 3-b. Should MSI add the instructional materials or sell the CDs without them? O Add the Instructional Materials O Sell the CDs without Instructional Materials
Transcribed Image Text:3-a. Suppose that the higher price of the CDs with instructional materials is expected to reduce demand to 32,000 units. Complete the table given below based on Requirement 1 and 2 data. CD with Instructions Materials Incremental CD Only Sales Revenue Variable Costs Contribution Margin Additional Development Costs Differential Profit (Loss) 3-b. Should MSI add the instructional materials or sell the CDs without them? O Add the Instructional Materials O Sell the CDs without Instructional Materials
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