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E7-8 (Algo) Analyzing Keep-or-Drop Decision [LO 7-2, 7-5) MSI is considering eliminating a product from its ToddleTown 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 MSr's information related to the Toddletown Tours collection follows: Segmented Income Statement for MSI'S ToddleTown Tours Product Lines Pet Post Store Grocery Office Parade Getaway Polko Sales revenue $75,000 $70,000 $24,000 Variable costs 33,000 29,000 19.00 B1,000 Contribution margin $42.000 141, cea $5,000 $18,000 Less: Direct Fixed costs 5,800 4.600 4,500 15,000 Segnent margin $36,200 $36,400 400 73,60 Lesst Common fixed costs 7,500 2,000 2,400 16,90 $28,700 129,400 Net operating income (loss) 12,000 5600 Total $169.000 1 1 3 "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 of 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-b. Should MSI drop the POP product? Complete this question by entering your answers in the tabs below. Complete this question by entering your answers in the tabs below. Reg 1 Req 3B Req Req 2 Calculate the incremental effect on profit if the POP product is eliminated. Effect on Profit Reg 2 > Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req3 Req 3B Calculate the incremental effect on profit if the POP product is eliminated. Suppose that $2,000 of the common fixed ca could be avoided if the POP product line were eliminated. Effect on Profit Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req 3A Req 3B Should MSI drop the POP product? Should MSI drop the POP product? Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req Req 3B wwwwww | Should MSI drop the POP product? Should MSI drop the POP product?