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MSI's educational products currently are sold without any supplemental materials. The company is considering the inclusion of nstructional materials such as an overhead slide presentation, potential test questions, and classroom bulletin board materials for eachers. A summary of the expected costs and revenues for MSI's two options follows: 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 38,000 units $ 33.00 $ 6.25 8.50 8.50 9.00 $ 32.25 Com CD with Instructional Materials 38,000 units $ 49.00 $ 8.75 12.50 11.75 9.00 $ 42.00 $ 105,000 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 reduce demand 20,000 units. Complete the able given below based on this scenario. 3-b. Should MSI add the instructional materials or sell the CDs without them?

MSI's educational products currently are sold without any supplemental materials. The company is considering the inclusion of nstructional materials such as an overhead slide presentation, potential test questions, and classroom bulletin board materials for eachers. A summary of the expected costs and revenues for MSI's two options follows: 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 38,000 units $ 33.00 $ 6.25 8.50 8.50 9.00 $ 32.25 Com CD with Instructional Materials 38,000 units $ 49.00 $ 8.75 12.50 11.75 9.00 $ 42.00 $ 105,000 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 reduce demand 20,000 units. Complete the able given below based on this scenario. 3-b. Should MSI add the instructional materials or sell the CDs without them?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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E7-9 (Algo) Analyzing Sell-or-Process-Further Decision [LO 7-2, 7-6] 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: 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 38,000 units $ 33.00 $ 6.25 8.50 8.50 9.00 $ 32.25 CD with Instructional Materials 38,000 units $ 49.00 $ 8.75 12.50 11.75 9.00 $ 42.00 $ 105,000 Required: 1. Based on the given data, compute the increase or decrease in profit that would result if instructional materials ere added the CDs. Complete this question by entering your answers in the tabs below. 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 20,000 units. Complete the table given below based on this scenario. 3-b. Should MSI add the instructional materials or sell the CDs without them?
Transcribed Image Text:E7-9 (Algo) Analyzing Sell-or-Process-Further Decision [LO 7-2, 7-6] 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: 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 38,000 units $ 33.00 $ 6.25 8.50 8.50 9.00 $ 32.25 CD with Instructional Materials 38,000 units $ 49.00 $ 8.75 12.50 11.75 9.00 $ 42.00 $ 105,000 Required: 1. Based on the given data, compute the increase or decrease in profit that would result if instructional materials ere added the CDs. Complete this question by entering your answers in the tabs below. 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 20,000 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 Sales Revenue Variable Costs Req 2 Based on the given data, compute the increase or decrease in profit that would result if instructional materials were added to the CDs. Contribution Margin Additional Development Costs Differential Profit (Loss) Show Transcribed Text Req 1 Sales Revenue Variable Costs Req 2 Req 3A Contribution Margin Additional Development Costs Differential Profit (Loss) $ $ $ CD Only Req 3A $ Req 3B $ $ 1,254,000 $ 902,500 x 351,500 $ ✓ 351,500 $ < Req 1 Req 3B CD Only CD with Instructional Materials Suppose that the higher price of the CDs with instructional materials is expected to reduce demand to 20,000 units. Complete the table given below based on this scenario. 1,254,000 $ 902,500 X 351,500 × $ 351,500 $ < Req 2 s 1,862,000 $ 1,254,000 608,000 $ 105,000 ✓ 503,000 $ Ć Incremental CD with Instructional Materials 608,000✔ 3,515,000 X 256,500 x 105,000 151,500 × Req 2 > Incremental 98,000 $ (274,000) (242,500) X 660,000✔ 320,000 105,000✔ (31,500) X 105,000 215,000 $ (136,500) X $ Req 3B >
Transcribed Image Text:Complete this question by entering your answers in the tabs below. Req 1 Sales Revenue Variable Costs Req 2 Based on the given data, compute the increase or decrease in profit that would result if instructional materials were added to the CDs. Contribution Margin Additional Development Costs Differential Profit (Loss) Show Transcribed Text Req 1 Sales Revenue Variable Costs Req 2 Req 3A Contribution Margin Additional Development Costs Differential Profit (Loss) $ $ $ CD Only Req 3A $ Req 3B $ $ 1,254,000 $ 902,500 x 351,500 $ ✓ 351,500 $ < Req 1 Req 3B CD Only CD with Instructional Materials Suppose that the higher price of the CDs with instructional materials is expected to reduce demand to 20,000 units. Complete the table given below based on this scenario. 1,254,000 $ 902,500 X 351,500 × $ 351,500 $ < Req 2 s 1,862,000 $ 1,254,000 608,000 $ 105,000 ✓ 503,000 $ Ć Incremental CD with Instructional Materials 608,000✔ 3,515,000 X 256,500 x 105,000 151,500 × Req 2 > Incremental 98,000 $ (274,000) (242,500) X 660,000✔ 320,000 105,000✔ (31,500) X 105,000 215,000 $ (136,500) X $ Req 3B >
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