MSI's educational products currently are 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 MSI's two options follows: 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 CD Only 42,000 units $26.00 $ 2.00 2.50 2.50 2.50 $9.50 CD with Instructional Materials. 42,000 units $ 53.00 $ 2.25 5.50 5.75 2.50 $ 16.00 $ 125,000 Required: 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. Should MSI add the instructional materials or sell the CDs without them? 3-a. Suppose that the higher price of the CDs with instructional materials is expected to reduce demand to 22,000 units. Complete the table given below based on this scenario. 3-b. Should MSI add the instructional materials or sell the CDs without them?
MSI's educational products currently are 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 MSI's two options follows: 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 CD Only 42,000 units $26.00 $ 2.00 2.50 2.50 2.50 $9.50 CD with Instructional Materials. 42,000 units $ 53.00 $ 2.25 5.50 5.75 2.50 $ 16.00 $ 125,000 Required: 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. Should MSI add the instructional materials or sell the CDs without them? 3-a. Suppose that the higher price of the CDs with instructional materials is expected to reduce demand to 22,000 units. Complete the table given below based on this scenario. 3-b. Should MSI add the instructional materials or sell the CDs without them?
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter1: Introduction To Managerial Accounting
Section: Chapter Questions
Problem 5E: From the choices presented in parentheses, choose the appropriate term for completing each of the...
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Transcribed Image Text:MSI's educational products currently are 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 MSI's two options follows:
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
CD Only
42,000 units
$26.00
$ 2.00
2.50
2.50
2.50
$9.50
CD with
Instructional
Materials
42,000 units
$53.00
$ 2.25
5.50
5.75
2.50
$16.00
$ 125,000
Required:
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. Should MSI add the instructional materials or sell the CDs without them?
3-a. Suppose that the higher price of the CDs with instructional materials is expected to reduce demand to 22,000 units. Complete the
table given below based on this scenario.
3-b. Should MSI add the instructional materials or sell the CDs without them?
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