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 classroom bulletin board materials for teachers. A summary of the expected costs and revenues for MSI's two options follows: CD Only 32,000 units $ 28.00 CD with Instructional Materials 32,000 units $ 43.00 Estimated demand Estimated sales price Estimated cost per unit $ 5.25 6.50 6.50 $5.75 9.50 9.75 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit manufacturing cost Additional development cost 6.00 6.00 $ 31.00 $105,000 $ 24.25 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 Requirement 1 and 2 data 3-b. Should MSI add the instructional materials or sell the CDs without them?

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that ba…