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E7-7 Analyzing Keep-or-Drop Decision (LO 7-2, 7-5) MSI is considering eliminating a product from its Toddle Town Tours collection. This collection is aimed at children one to three years of age and includes tours" of a hypothetical town. Two products, The Pet Store Parade and The Grocery Getaway, have impressive sales. However, sales for the third CD in the collection, The Post Office Polka, have 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: Segmented Income Statement for MSI's ToddleTown Tours Product Lines Post Pet Store Grocery Office Parade Getaway Polka Sales revenue $120.000 $115,000 $33.000 $268,000 Variable costs 51,000 47.000 29.000 127,000 Contribution margin $ 69,000 $ 68,000 $ 4,000 $141,000 Less: Direct Fixed costs 7.600 7.300 3.100 18,000 Segment margin $ 61,400 $ 60,700 $ 900 $123,000 Less Common fed costs 6.000 5.750 1.650 13.400 Net operating income foss) $ 55,400 $54,950 $ 750) $109,600 Total "Allocated based on total sales dollars. 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. Effect on Profit 3-a. Calculate the incremental effect on profit if the POP product is eliminated. Suppose that $1.200 of the common feed costs could be avoided if the POP product line were eliminated Efect on Profit