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Several other CDs are planned for this collection, but none is ready for production. MSI's information related to the ToddleTown Tours collection follows: Sales revenue Variable costs Contribution margin Less: Direct Fixed costs Segment margin Less: Common fixed costs* Net operating income (loss) Segmented Income Statement for MSI's Toddle Town Tours Product Lines Pet Store Parade $ 105,000 45,000 $ 60,000 7,000 $ 53,000 5,250 Grocery Getaway $ 100,000 41,000 $ 59,000 6,400 $ 52,600 5,000 $ 47,750 $ 47,600 Post Office Polka $ 30,000 25,000 $ 5,000 4,800 $ 200 1,500 $ (-1,300) Total $ 235,000 111,000 $ 124,000 18,200 $ 105,800 11,750 $ 94,050 *Allocated based on total sales revenue. MSI has determined that elimination of the Post Office Polka (POP) program would not impact sales of the other two items. The remaining fived overhead currently allocated to the POP product would be redistributed to the remaining two products.

Several other CDs are planned for this collection, but none is ready for production. MSI's information related to the ToddleTown Tours collection follows: Sales revenue Variable costs Contribution margin Less: Direct Fixed costs Segment margin Less: Common fixed costs* Net operating income (loss) Segmented Income Statement for MSI's Toddle Town Tours Product Lines Pet Store Parade $ 105,000 45,000 $ 60,000 7,000 $ 53,000 5,250 Grocery Getaway $ 100,000 41,000 $ 59,000 6,400 $ 52,600 5,000 $ 47,750 $ 47,600 Post Office Polka $ 30,000 25,000 $ 5,000 4,800 $ 200 1,500 $ (-1,300) Total $ 235,000 111,000 $ 124,000 18,200 $ 105,800 11,750 $ 94,050 *Allocated based on total sales revenue. MSI has determined that elimination of the Post Office Polka (POP) program would not impact sales of the other two items. The remaining fived overhead currently allocated to the POP product would be redistributed to the remaining two products.

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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nave impressive sales. However, sales for the thira CD in the collection, POST UMICE POika (POP), nave lagged the others. Several other CDs are planned for this collection, but none is ready for production. MSI's information related to the ToddleTown Tours collection follows: Sales revenue Variable costs Contribution margin Less: Direct Fixed costs Segment margin Less: Common fixed costs* Net operating income (loss) Segmented Income Statement for MSI's Toddle Town Tours Product Lines Pet Store Parade $ 105,000 45,000 $ 60,000 7,000 $ 53,000 5,250 Grocery Getaway $ 100,000 41,000 $ 47,750 $ 47,600 $ (-1,300) $ 59,000 6,400 $ 52,600 5,000 Post Office Polka $ 30,000 25,000 $ 5,000 4,800 Total $ 235,000 111,000 $ 124,000 18,200 $ 105,800 11,750 $ 94,050 $ 200 1,500 *Allocated based on total sales revenue. MSI has determined that elimination of the Post Office Polka (POP) program would not impact sales of the other two items. The remaining fixed overhead currently allocated to the POP product would be redistributed to the remaining two products. Required: 1. Calculate the incremental effect on profit if the POP product is eliminated. 2. Should MSI drop the POP product? 3-a. Calculate the incremental effect on profit if the POP product is eliminated. Suppose that $1,000 of the common fixed costs could be avoided if the POP product line were eliminated. 3-b. Should MSI drop the POP product?
Transcribed Image Text:nave impressive sales. However, sales for the thira CD in the collection, POST UMICE POika (POP), nave lagged the others. Several other CDs are planned for this collection, but none is ready for production. MSI's information related to the ToddleTown Tours collection follows: Sales revenue Variable costs Contribution margin Less: Direct Fixed costs Segment margin Less: Common fixed costs* Net operating income (loss) Segmented Income Statement for MSI's Toddle Town Tours Product Lines Pet Store Parade $ 105,000 45,000 $ 60,000 7,000 $ 53,000 5,250 Grocery Getaway $ 100,000 41,000 $ 47,750 $ 47,600 $ (-1,300) $ 59,000 6,400 $ 52,600 5,000 Post Office Polka $ 30,000 25,000 $ 5,000 4,800 Total $ 235,000 111,000 $ 124,000 18,200 $ 105,800 11,750 $ 94,050 $ 200 1,500 *Allocated based on total sales revenue. MSI has determined that elimination of the Post Office Polka (POP) program would not impact sales of the other two items. The remaining fixed overhead currently allocated to the POP product would be redistributed to the remaining two products. Required: 1. Calculate the incremental effect on profit if the POP product is eliminated. 2. Should MSI drop the POP product? 3-a. Calculate the incremental effect on profit if the POP product is eliminated. Suppose that $1,000 of the common fixed costs could be avoided if the POP product line were eliminated. 3-b. Should MSI drop the POP product?
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