Answered step by step
Verified Expert Solution
Question
1 Approved Answer
MSI's educational products are currently sold without any supplemental materials. The company is considering the inclusion of instructional materials such as an overhead slide presentation,
MSI's 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 classeoom bulletin board materials for teachers. A summary of the expected costs and revenues for MSI's two options follows:
CD Only 40,000 units $ 34.00 CD with Instructional Materials 40,000 units $ 51.00 Estimated demand Estimated sales price Estimated cost per unit Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit manufacturing cost Additional development cost $ 2.00 9.50 9.50 10.00 $ 31.00 $ 2.75 13.50 12.75 10.00 $ 39.00 $105,000 CD Only CD with Instructions Materials Incremental Sales Revenue Variable Costs Contribution Margin Additional Development Costs Differential Profit (Loss) CD Only CD with Instructions Materials Incremental Sales Revenue Variable Costs Contribution Margin Additional Development Costs Differential Profit (Loss) 1. Based on the given data, compute the increase or decrease in profit that would result if instructional materials were added to the CDs.
2. Suppose that the higher price of the CDs with instructional materials is expected to reduce demand to 22,000 units. Complete the table given beliw based on Requirement 1 and 2 data.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started