E7-8 (Algo) Analyzing Keep-or-Drop Decision [LO 7-2.7-5) MSI is considering eliminating a product from its Toddlo 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 Mais information related to the Toddle Town Tours collection follows: Segmented Income Statement for MSI'S Toddle Town Tours Product Lines Pont Pet Store Grocery Office Parade Getaway Polka Total Sales revenue $95.000 390.000 $28,000 $213.000 Variable costs 45000 37000 23.000 101.000 Contribution margin $54.000 $53,000 $ 5.000 $112000 Less Direct Fixed costs 6.600 5 800 4.000 17 000 Segment margin $47.400 $47 200 $ 400 $ 95.000 Loss Common Exed cost 9.500 9.000 2.800 21.300 Net operating income (losa) $37.000 S42200 $12.400) $23.700 "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 foed overhead currently allocated to the POP product would be redistributed to the remaining two products Required: 1. Calculate the incremental effect on profit of 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 $2.000 of the common fixed costs could be avoided if the POP product line were eliminated 3-6. Should MSI drop the POP product