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:

$\backslash$table$[[,\backslash$table$[[$Segmented Income Statement$],[$ToddleTown Tours Product$]],\backslash$table$[[$or MSI's$],[$Lines$]],,],[,\backslash$table$[[$Pet Store$],[$Parade$]],\backslash$table$[[$Grocery$],[$Getaway$]],\backslash$table$[[$Post office$],[$Polka$]],$Total$],[$Sales revenue,$$105,000,$$$100,000,$$$30,000,$$$235,000$

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?

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

Required $1$

Required $2$

Required $3A$

Required $3$B

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

Effect on Profit

MSI's educational products currently are sold without any supplemental materials. The company is considering the inclusion of instructional materials such as an overhead slide presentation, potential test questions, and classroom bulletin board materials for teachers. A summary of the expected costs and revenues for MSI's two options follows:

$\backslash$table$[[,,\backslash$table$[[$CD with$],[$Instructional$],[$Materials$]]],[$Estimated demand,CD Only,$41,000$ units$],[$Estimated sales price,$$1,000$ units,$],[$Estimated cost per unit,$25\mathrm{.}00,52\mathrm{.}00],[$Direct materials,$$1\mathrm{.}50,1\mathrm{.}75],[$Direct labor,$2\mathrm{.}00,5\mathrm{.}00],[$Variable manufacturing overhead,$2\mathrm{.}00,5\mathrm{.}25],[$Fixed manufacturing overhead,$2\mathrm{.}00,2\mathrm{.}00],[$Unit manufacturing cost,$$7\mathrm{.}50,$$$14\mathrm{.}00$