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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 Materials 42,000 units 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 42,000 units $ 26.00 $ 53.00 $ 2.00 $ 2.25 2.50 5.50 2.50 5.75 2.50 2.50 $ 9.50 $ 16.00 $ 125,000 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 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? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 3B

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 Materials 42,000 units 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 42,000 units $ 26.00 $ 53.00 $ 2.00 $ 2.25 2.50 5.50 2.50 5.75 2.50 2.50 $ 9.50 $ 16.00 $ 125,000 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 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? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 3B

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter4: Activity-based Costing
Section: Chapter Questions
Problem 4CE: Larsen, Inc., produces two types of electronic parts and has provided the following data: There are...
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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 Materials 42,000 units 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 $ 53.00 $ 2.00 $ 2.25 2.50 5.50 2.50 5.75 2.50 2.50 $ 9.50 $ 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? 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 Variable Costs Contribution Margin Additional Development Costs Differential Profit (Loss) CD with Instructional CD Only Incremental Materials < Req 1 Req 2 >
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: CD with Instructional Materials 42,000 units 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 $ 53.00 $ 2.00 $ 2.25 2.50 5.50 2.50 5.75 2.50 2.50 $ 9.50 $ 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? 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 Variable Costs Contribution Margin Additional Development Costs Differential Profit (Loss) CD with Instructional CD Only Incremental Materials < Req 1 Req 2 >
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