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. MSIs information related to the ToddleTown Tours collection follows:

Segmented Income Statement for MSIs
ToddleTown Tours Product Lines
	Pet Store Parade		Grocery Getaway		Post Office Polka	Total
Sales revenue	70,000		65,000		23,000	158,000
Variable costs	31,000		27,000		18,000	76,000
Contribution margin	39,000		38,000		5,000	82,000
Less: Direct Fixed costs	5,600		4,300		4,500	14,400
Segment margin	33,400		33,700		500	67,600
Less: Common fixed costs*	7,000		6,500		2,300	15,800
Net operating income (loss)	26,400		27,200		(1,800)	51,800

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 $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?