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Posted on Jul 16, 2024

Part of 4 4 Required information E7-6 through E7-10 The following information applies to the questions als played below) Morning Sky, Inc. (MSI), manufactures and

Part of 4 4 Required information E7-6 through E7-10 The following information applies to the questions als played below) Morning Sky, Inc. (MSI), manufactures and sells computer games. The company has several product lines based on the age range of the target market. MSi sells both individual gomes as well as packaged sets. All games are in CD format, and some utilize accessories such as steering wheels, electronic tablets, and hand controls. To date, MSI has developed and manufactured all the CDs itself as well as the accessories and packaging for all of its products The gaming market has traditionally been targeted at teenagers and young adults; however the increasing affordability of computers and the incorporation of computer activities into junior high and elementary school curriculums has led to a significant increase in sales to younger children. MS has always included games for younger children but now wants to expand its business to capitalize on changes in the industry. The company currently hos excess capacity and is Investigating several possible ways to improve profitability, ei ole E7-8 (Static) Analyzing Keep-or-Drop Decision (LO 7-2, 7-5) MSI is considering minating 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 tagged 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: Bead The Statement for it Toddler Tours Product Lines Post Store Grocery Or Lee Parade Cetay Polka Total Bales revenue 350.000045,000 315.000 Variable cesta $110,000 33,000 19.000 10,000 52.000 Contribution margin $27.000 $26.000 35.000 $50,000 Le Duct CL 0.000 1.100 3.500 11.400 festa 123,200 622,00 $1,500 Lost Common tund 346,600 1,400 12.60 320 31,685 Tes operation (1) 3.000 ISO S320 336.220 "Allocated based on total sales revenue MSI's information related to the ToddleTown Tours collection follows: Part 3 of 4 4. points Segmented Income Statement for MSIB Toddletom tours Product Lines Pet Pont Store Grocery office Parade Cataway Polka Total Sales revenge 550,000 545,000 $15.000 $110.000 Variable costs 23,000 19.000 10.000 $2,000 Contribution margin $27.000 526,000 $ 5.000 $50,000 Lust Direct Pixed costs 5,800 3.100 3.500 11,400 Segnant margin 322,200 022,900 91,500 46,600 test common fixed costs. 14,400 12,960 4,320 31,680 Het operating Incon (los 517,000 59,940 S2,020) $14,220 H "Allocated based on total sales revenue. 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? 3-a. Calculate the incremental effect on profit if the POP product is ellminated. Suppose that $3,700 of the common fixed costs could be avoided if the POP product line were eliminated 3-b. Should MSI drop the POP product? ces Complete this question by entering your answers in the tabs below. Reg1 Nec 2 Reg 3 Reg 36 Calculate the incremental effect on profit if the POP product is eliminated Coton Prote Req2 > MSI's Information related to the ToddleTown Tours collection follows: of Segmented Income statement for MSI Toddletown Tours Product Lines Pet l'ost Store Grocery Office Parade Getaway Polka Total Sales revenge $50.000 345,000 $15,000 $110,000 Variable coste 23,000 19,000 10,000 52,000 Contribution margin $27,000 $26.000 $ 5,000 $ 58,000 LG Direct Fixed costs 4.800 3.100 3.500 11.400 Segment margin $22,200 522,900 $ 1,500 $46.600 Lost Common fixed coats 14,400 12.960 4,320 31,600 Het operating income (los) $1,300 5.9.240 12,820 14.920 Book Hint *Allocated based on total sales revenue 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? 3.a. Calculate the incremental effect on profit if the POP product is eliminated. Suppose that $3,700 of the common fixed costs could be avoided if the POP product line were eliminated. 3-b. Should MSI drop the POP product? References Complete this question by entering your answers in the tabs below. Red 30 Reg 1 R2 Reg JA Should MSI drop the POP product? Should I drop the POP product? MSI's Information related to the ToddleTown Tours collection follows: 014 Segmented Income Statement for ' Toddletown Tours Product Lines Pot Post Store Grocery Office Parade Getaway Polka Total Sales revenue $50,000 $45.000 $15,000 $110,000 Variable conta 23,000 19.000 10,000 52,000 Contribution margin $27.000 $26,000 $5,000 $ 58,000 Lust Direct Fixed costs 4,800 3.100 3,500 11,400 Segment margin $22,200 522,900 $ 1,500 $ 46,600 Les Cowon fixed costs 14,400 12,960 4,320 31,680 Net operating income (loan) 5 7,800 $ 9,940 $12,020) 3 14,920 ook Hi "Allocated based on total sales revenue 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? 3.a. Calculate the incremental effect on profit if the POP product is eliminated. Suppose thot $3,700 of the common fixed costs could be avoided if the POP product line were eliminated 3.b. Should MSI drop the POP product? frences Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 ROLJA Reg 30 Calculate the incremental effect on profit if the POP product is eliminated. Suppose that 53,700 of the common fixed costs could be avoided if the POP product line were eliminated rect on to Segmented Income statement for MSI'S Toddletown Tours Product Lines Pet Pont Store Grocery office Parade Gotavay Polka Total Sales revence 550.000 $45,000 $15,000 $110,000 Variable costs 23,000 19,000 10,000 52,000 Contribution margin $27,000 $26.000 $ 5,000 $ 50,000 Lost Direct Fixed costs 4,800 3.100 3.500 11,400 Segment margin 522,200 322,900 $ 1,500 5.46,600 Lesst Common fixed costs 14,400 12,960 4,320 31,680 Het operating Income (los) $9.40 12,020) 514.920 "Allocated based on total sales revenue 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 produ 3.a. Calculate the incremental effect on profit if the POP product is eliminated Suppose that $3,700 of the common fixed costs could be avoided if the POP product line were eliminated 3-b. Should MSI drop the POP product? nous Complete this question by entering your answers in the tabs below. Reg1 RG 2 Req3A Regal Should MSI drop the POP product? Should MSI drop the POP product?