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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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:
CD with
Instructional
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
Required:
CD Only
26,000 units
$ 22.00
$ 2.25
Materials
26,000 units
$ 37.00
$ 2.75
3.50
6.50
3.50
6.75
3.00
3.00
$ 12.25
$ 19.00
$ 105,000
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 19,000 units. Complete the
table given below based on this scenario.
3-b. Should MSI add the instructional materials or sell the CDs without them?
Complete this question by entering your answers in the tabs below.
Req 1
Req 2
Req 3A
Req 3B
Based on the given data, compute the increase or decrease in profit that would result if instructional materials were added to
the CDs.
Sales Revenue
CD with Instructional
CD Only
Incremental
Materials
S
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Transcribed Image Text:Required information
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:
CD with
Instructional
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
Required:
CD Only
26,000 units
$ 22.00
$ 2.25
Materials
26,000 units
$ 37.00
$ 2.75
3.50
6.50
3.50
6.75
3.00
3.00
$ 12.25
$ 19.00
$ 105,000
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 19,000 units. Complete the
table given below based on this scenario.
3-b. Should MSI add the instructional materials or sell the CDs without them?
Complete this question by entering your answers in the tabs below.
Req 1
Req 2
Req 3A
Req 3B
Based on the given data, compute the increase or decrease in profit that would result if instructional materials were added to
the CDs.
Sales Revenue
CD with Instructional
CD Only
Incremental
Materials
S
< Prev
8
of 9
Next >
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