!Required informationE7-6 through E7-9.[The following information applies to the questions displayed below.]Morning Sky, Incorporated (MSI), manufactures and sells computer games. The company has several product lines basedon the age range of the target market. MSI sells both individual games as well as packaged sets. All games are in CDformat, and some utilize accessories such as steering wheels, electronic tablets, and hand controls. To date, MSI hasdeveloped and manufactured all the CDs itself as well as the accessories and packaging for all of its products.The gaming market has traditionally been targeted at teenagers and young adults; however, the increasing affordability ofcomputers and the incorporation of computer activities into junior high and elementary school curriculums has led to asignificant increase in sales to younger children. MSI has always included games for younger children but now wants toexpand its business to capitalize on changes in the industry. The company currently has excess capacity and isinvestigating several possible ways to improve profitability.E7-7 (Static) Analyzing Make-or-Buy Decision [LO 7-2, 7-4]MSI is considering outsourcing the production of the handheld control module used with some of its products. The company hasreceived a bid from Monte Legend Company (MLC) to produce 10,000 units of the module per year for $16 each. The followinginformation pertains to MSI's production of the control modules:Direct materialsDirect laborVariable manufacturing overheadFixed manufacturing overheadTotal cost per unit$ 9423$ 18MSI has determined it could eliminate all variable costs if the control modules were produced externally, but none of the fixedoverhead is avoidable. At this time, MSI has no specific use in mind for the space that is currently dedicated to the control moduleproduction.Required:1. Compute the difference in cost between making and buying the control module.2. Should MSI buy the modules from MLC or continue to make them?3-a. Suppose the MSI space currently used for the modules could be utilized by a new product line that would generate $35,000 inannual profit. Recompute the difference in cost between making and buying under this scenario.3-b. Does this change your recommendation to MSI?

Make or buy decision is a very crucial decision making for company management because it impacts the…

Required information E7-6 through E7-9. [The following information applies to the questions displayed below.] Morning Sky, Incorporated (MSI), manufactures and sells computer games. The company has several product lines based on the age range of the target market. MSI sells both individual games as well as packaged sets. All games are in CD format, and some utilize accessories such as steering wheels, electronic tablets, and hand controls. To date, MSI has developed and manufactured all the CDs itself as well as the accessories and packaging for all of its products. The gaming market has traditionally been targeted at teenagers and young adults; however, the increasing affordability of computers and the incorporation of computer activities into junior high and elementary school curriculums has led to a significant increase in sales to younger children. MSI has always included games for younger children but now wants to expand its business to capitalize on changes in the industry. The company currently has excess capacity and is investigating several possible ways to improve profitability.

Required information E7-6 through E7-9. [The following information applies to the questions displayed below.] Morning Sky, Incorporated (MSI), manufactures and sells computer games. The company has several product lines based on the age range of the target market. MSI sells both individual games as well as packaged sets. All games are in CD format, and some utilize accessories such as steering wheels, electronic tablets, and hand controls. To date, MSI has developed and manufactured all the CDs itself as well as the accessories and packaging for all of its products. The gaming market has traditionally been targeted at teenagers and young adults; however, the increasing affordability of computers and the incorporation of computer activities into junior high and elementary school curriculums has led to a significant increase in sales to younger children. MSI has always included games for younger children but now wants to expand its business to capitalize on changes in the industry. The company currently has excess capacity and is investigating several possible ways to improve profitability.

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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MSI has been approached by a fourth-grade teacher from Portland about the possibility of creating a specially designed game that would be customized for her classroom and environment. The teacher would like an educational game to correspond to her classroom coverage of the history of the Pacific Northwest, and the state of Oregon in particular. MSI has not sold its products directly to teachers or school systems in the past, but its Marketing Department identified that possibility during a recent meeting. The teacher has offered to buy 2,100 copies of the CD at a price of $7.00 each. MSI could easily modify one of its existing educational programs about U.S. history to accommodate the request. The modifications would cost approximately $370. A summary of the information related to production of MSI's current history program follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost per unit Sales price per unit $ 1.17 0.49 2.05 1.80 $…
Required information [The following information applies to the questions displayed below.] Morning Sky, Incorporated (MSI), manufactures and sells computer games. The company has several product lines based on the age range of the target market. MSI sells both individual games as well as packaged sets. All games are in CD format, and some utilize accessories such as steering wheels, electronic tablets, and hand controls. To date, MSI has developed and manufactured all the CDs itself as well as the accessories and packaging for all of its products. The gaming market has traditionally been targeted at teenagers and young adults; however, the increasing affordability of computers and the incorporation of computer activities into junior high and elementary school curriculums has led to a significant increase in sales to younger children. MSI has always included games for younger children but now wants to expand its business to capitalize on changes in the industry. The company currently…
Required information [The following information applies to the questions displayed below.]Morning Sky, Inc. (MSI), manufactures and sells computer games. The company has several product lines based on the age range of the target market. MSI sells both individual games as well as packaged sets. All games are in CD format, and some utilize accessories such as steering wheels, electronic tablets, and hand controls. To date, MSI has developed and manufactured all the CDs itself as well as the accessories and packaging for all of its products. The gaming market has traditionally been targeted at teenagers and young adults; however, the increasing affordability of computers and the incorporation of computer activities into junior high and elementary school curriculums has led to a significant increase in sales to younger children. MSI has always included games for younger children but now wants to expand its business to capitalize on changes in the industry. The company currently has excess…
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