MSIs educational products are currently 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 MSIs two options follows:

CD Only		CD with Instructional Materials
Estimated demand	29,000 units	29,000 units
Estimated sales price	25.00	40.00
Estimated cost per unit
Direct materials	3.75	4.25
Direct labor	5.00	8.00
Variable manufacturing overhead	5.00	8.25
Fixed manufacturing overhead	4.50	4.50
Unit manufacturing cost	18.25	25.00
Additional development cost		105,000

1. Based on the given data, compute the increase or decrease in profit that would result if instructional materials were added to the CDs.

	CD only	CD with Instructional Materials	Incremental
Sales Revenue
Variable Cost
Contribution Margin
Additional Development Cost
Differential Profit (loss)

2. Suppose that the higher price of the CDs with instructional materials is expected to reduce demand to 20,000 units. Complete the table given below based on Requirement 1 and 2 data.

	CD Only	CD with Instructional Materials	Incremental
Sales Revenue
Variable Costs
Contribution Margin
Additional Development Cost
Differential Profit (loss)