MSI's educational products currently are 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 Materials 42,000 units Estimated demand Estimated sales price Estimated cost per unit Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit manufacturing cost Additional development cost Required: CD Only 42,000 units $ 26.00 $ 53.00 $ 2.00 $ 2.25 2.50 5.50 2.50 5.75 2.50 2.50 $ 9.50 $ 16.00 $ 125,000 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 this scenario. 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. Req 1 Req 2 Req 3A Req 3B
MSI's educational products currently are 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 Materials 42,000 units Estimated demand Estimated sales price Estimated cost per unit Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit manufacturing cost Additional development cost Required: CD Only 42,000 units $ 26.00 $ 53.00 $ 2.00 $ 2.25 2.50 5.50 2.50 5.75 2.50 2.50 $ 9.50 $ 16.00 $ 125,000 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 this scenario. 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. Req 1 Req 2 Req 3A Req 3B
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:MSI's educational products currently are 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
Materials
42,000 units
Estimated demand
Estimated sales price
Estimated cost per unit
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Unit manufacturing cost
Additional development cost
CD Only
42,000 units
$ 26.00
$ 53.00
$ 2.00
$ 2.25
2.50
5.50
2.50
5.75
2.50
2.50
$ 9.50
$ 16.00
$ 125,000
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 this scenario.
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.
Req 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.
Sales Revenue
Variable Costs
Contribution Margin
Additional Development Costs
Differential Profit (Loss)
CD with Instructional
CD Only
Incremental
Materials
<
Req 1
Req 2 >
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