MSI is considering outsourcing the production of the handheld control module used with some of its products. The company has received a bid from Monte Legend Co. (MLC) to produce 18,000 units of the module per year for $25.00 each. The following information pertains to MSIs production of the control modules: Direct materials $ 10 Direct labor 7 Variable manufacturing overhead 7 Fixed manufacturing overhead 4 Total cost per unit $ 28 MSI has determined that it could eliminate all variable costs if the control modules were produced externally, but none of the fixed overhead is avoidable. At this time, MSI has no specific use in mind for the space that is currently dedicated to the control module production. Required: 1. Compute the difference in cost between making and buying the control module. 2. Should MSI buy the modules from MLC or continue to make them? Buy Make 3-a. Suppose that the MSI space currently used for the modules could be utilized by a new product line that would generate $28,000 in annual profit. Recompute the difference in cost between making and buying under this scenario. 3-b. Does this change your recommendation to MSI? Yes No check my workView Hint #1referencesebook & resources 3.value: 5.00 points 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 $ 100,000 $ 95,000 $ 29,000 $ 224,000 Variable costs 43,000 39,000 24,000 106,000 Contribution margin $ 57,000 $ 56,000 $ 5,000 $ 118,000 Less: Direct Fixed costs 6,800 6,100 4,700 17,600 Segment margin $ 50,200 $ 49,900 $ 300 $ 100,400 Less: Common fixed costs* 5,000 4,750 1,450 11,200 Net operating income (loss) $ 45,200 $ 45,150 $ (1,150) $ 89,200 *Allocated based on total sales dollars. 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? Yes No 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? Yes No