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. MSI's information related to the ToddleTown Tours collection follows: Segmented Income Statement for MSI's ToddleTown Tours Product Lines ces Sales revenue Variable costs Contribution margin Less: Direct Fixed costs Segnent margin. Less: Common fixed costs Net operating income (loss) $150,000 63,000 Pet Store Grocery Parade Getaway $145,000 59,000 Post Office Polka Total $39,000 $334,000 35,000 $ 4,000 157,000 $177,000 9,100 3,700 21,600 $ 300 $155,400 7,250 1,950 16,700 $ 87,000 8,800 $78,200 7,500 $ 86,000 $ 76,900 $ 70,700 $ 69,650 "Allocated based on total sales revenue. $(1,650) $130,700 MSI has determined that elimination of the Post Office Polka (POP) program would not impact sales of the other twoltems. 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 if the POP product is eliminated. Suppose that $1,200 of the common fixed costs could be avoided if the POP product line were eliminated. 3-b. Should MSI drop the POP product? 9 Mem in of 13 www Next >