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 co be avoided if the POP product line were eliminated. 

 3-b. Should MSI drop the POP product?

 

Sales revenue Variable costs Contribution margin Less: Direct Fixed costs Segment margin Less: Common fixed costs* Net operating income (loss) Parade $ 110,000 47,000 $ 63,000 7,200 $ 55,800 5,500 $ 50,300 Getaway $ 105,000 43,000 $ 62,000 6,700 $ 55,300 5,250 $ 50,050 Polka $ 31,000 28,000 $ 3,000 2,800 $ 200 1,550 $ (-1,350) Total $ 246,000 118,000 $ 128,000 16,700 $ 111,300. 12,300 $ 99,000 "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. remaining fixed overhead currently allocated to the POP product would be redistributed to the remaining two products.