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 Grocery Getaway, have impressive sales.

However, sales for the third CD in the collection, Post Office Polka $($POP$),$ 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:

$*$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:

Calculate the incremental effect on profit if the POP product is eliminated.

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 costs could

be avoided if the POP product line were eliminated.

$3-$b$.$ Should MSI drop the POP product?

Answer is complete but not entirely correct.

Complete this question by entering your answers in the tabs below.