Required information E7.6 through E7.10. The following information applies to the questions displayed below) Morning Sky, Inc. (MSO), manufactures and sells computer games. The company has several product lines based on the age range of the target market. MSi sells both individual games 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 has excess capacity and is Investigating several possible ways to improve profitability. E7-7 (Algo) Analyzing Make-or-Buy Decision (LO 7-2, 7-4) 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 15,000 units of the module per year for $32.00 each. The following Information pertains to MSi's production of the control modules Direct materiais Diret labor Variable manufacturing overhead Pixed manufacturing overhead Total cost per unit 315 10 6 3 $34 MSI has determined that it could eliminate all variable costs if the control modules were produced externally, but none of the fored 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? 3.a. Suppose that the MSI space currently used for the modules could be utilized by a new product line that would generate $27.000 in annual profil. Recompute the difference in cost between making and buying under this scenario. 3-b. Does this change your recommendation to MSI? Complete this question by entering your answers in the tabs below. Regt Reg 2 Reg DA Reg 38 Does this change your recommendation to MSI? Does this change your recommendation to MSI? ReqIA Required information E7-6 through E7.10 The following information applies to the question displayed below Morning Sky, Inc. (MS manufactures and sells computer games. The company has several product lines based on the age range of the target market MSi sells both individual games as well as packaged sets. All games are in CD format and some tre accessories such as steering wheels, electronic tablets, and hand control. To dati, 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. MSI has always included games for younger children but now wants to expand its business to capitalize on changes in the industry. The company currently has excess capacity and is Investigating several possible ways to improve profitability E7-8 (Algo) Analyzing Keep-or-Drop Decision (LO 7-2, 7-5] MSI is considering eliminating a product from its ToddleTown Tours collection. This collection is alimed at children one to three years of age and includes ours of a hypothetical town. Tyo 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 lagoed 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: Bed For Toddlers Toets Product Lines Tout Pet Store Grocery orice Tree Cat Falke Total les teve $35.000 550,00 5 25.000 125.000 Variable et 25.000 21,00 35.000 61.000 Contributor 30.000 23.000 3,000,000 La Direct Tiedot 5.0DD 4.600 12.00 fegant margin 25,000 25,600 1 1.000 1.000 Las Como fundo 14.00 13.00 13.00 Het operating con $12.00 4.120) 29.610 "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 fired overhead currently located 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. Calculate the incremental effect on profit if the POP product is eliminated Surpose that 54.000 of the common fixed costs could be avoided if the POP product line were eliminated 3-5. Should MSI drop the POP product? Complete this question by entering your answers in the tabs below 1 Reg2 RA R36 Calculate the incremental effect on proti POP product imited