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Required information 2.00 points MSI is considering eliminating a product from its ToddleTown Tours collection. This collection is aimed at children one to three years
Required information 2.00 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. MSI's information related to the ToddleTown Tours collection follows: Segmented Income Statement for MSI's ToddleTown Tours Product Lines Post Pet Store Grocery Office ParadeGetaway Polka Total Sales revenue Variable costs $130,000 $125,000 $35,000 $290,000 51,000 31,000 137,000 S 75,000 S 74,000 4,000 $153,000 3,300 19,200 $ 67,000 S 66,100 S 700 $133,800 1,750 14,500 55,000 Contribution margin Segment margin Net operating income (loss) Less: Direct Fixed costs 8,000 7,900 6,250 59,850 Less: Common fixed costs 60,500 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. on Proft 2. Should MSI drop the POP product? No
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