Question
In: Accounting
MSI’s educational products are currently sold without any supplemental materials. The company is considering the inclusion...
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 | CD with Instructional Materials | |
| Estimated demand | 29,000 units | 29,000 units |
| Estimated sales price | 25.00 | 40.00 |
| Estimated cost per unit | ||
| Direct materials | 3.75 | 4.25 |
| Direct labor | 5.00 | 8.00 |
| Variable manufacturing overhead | 5.00 | 8.25 |
| Fixed manufacturing overhead | 4.50 | 4.50 |
| Unit manufacturing cost | 18.25 | 25.00 |
| Additional development cost | 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.
| CD only | CD with Instructional Materials | Incremental | |
| Sales Revenue | |||
| Variable Cost | |||
| Contribution Margin | |||
| Additional Development Cost | |||
| Differential Profit (loss) |
2. Suppose that the higher price of the CDs with instructional materials is expected to reduce demand to 20,000 units. Complete the table given below based on Requirement 1 and 2 data.
| CD Only | CD with Instructional Materials | Incremental | |
| Sales Revenue | |||
| Variable Costs | |||
| Contribution Margin | |||
| Additional Development Cost | |||
| Differential Profit (loss) |
Solutions
Expert Solution
Solution 1:
| Computation of Profit - MSI Educational Products | |||
| Particulars | CD Only | CD with instructions materials | Incremental |
| Sales | $725,000.00 | $1,160,000.00 | $435,000.00 |
| Variable costs | $398,750.00 | $594,500.00 | $195,750.00 |
| Contribution margin | $326,250.00 | $565,500.00 | $239,250.00 |
| Additional development costs | $0.00 | $105,000.00 | $105,000.00 |
| Differential profit (Loss) | $326,250.00 | $460,500.00 | $134,250.00 |
Solution 2:
| Computation of Profit - MSI Educational Products | |||
| Particulars | CD Only | CD with instructions materials | Incremental |
| Sale volume | 29000 | 20000 | |
| Sales | $725,000.00 | $800,000.00 | $75,000.00 |
| Variable costs | $398,750.00 | $410,000.00 | $11,250.00 |
| Contribution margin | $326,250.00 | $390,000.00 | $63,750.00 |
| Additional development costs | $0.00 | $105,000.00 | $105,000.00 |
| Differential profit (Loss) | $326,250.00 | $285,000.00 | -$41,250.00 |
ekkarill92 answered 1 year agoRelated Solutions
MSI’s educational products are currently sold without any supplemental materials. The company is considering the inclusion...
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
CD
with Instructional Materials
Estimated demand
33,000
units
33,000
units
Estimated sales price
$
28.00
$
44.00
Estimated cost per unit
Direct materials
$
5.75
$
6.25
Direct labor
7.00...
MSI’s educational products are currently sold without any supplemental materials. The company is considering the inclusion...
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
CD
with Instructional Materials
Estimated demand
40,000
units
40,000
units
Estimated sales price
$
34.00
$
51.00
Estimated cost per unit
Direct materials
$
2.00
$
2.75
Direct labor
9.50...
MSI’s educational products are currently sold without any supplemental materials. The company is considering the inclusion...
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
CD with Instructional Materials
Estimated demand
42,000
units
42,000
units
Estimated sales price
$
26.00
$
53.00
Estimated cost per unit
Direct materials
$
2.00
$
2.25
Direct labor
2.50...
MSI’s educational products are currently sold without any supplemental materials. The company is considering the inclusion...
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
CD
with Instructional Materials
Estimated
demand
30,000
units
30,000
units
Estimated sales
price
$
26.00
$
41.00
Estimated cost
per unit
Direct
materials
$
4.25
$
4.75
Direct
labor
5.50...
MSI’s educational products are currently sold without any supplemental materials. The company is considering the inclusion...
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 CD with Instructional Materials
Estimated demand 36,000 units 36,000 units Estimated sales price $
30.00 $ 47.00 Estimated cost per unit Direct materials $ 5.25 $
7.75 Direct labor 7.50...
MSI’s educational products are currently sold without any supplemental materials. The company is considering the inclusion...
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
CD
with Instructional Materials
Estimated demand
36,000
units
36,000
units
Estimated sales price
$
30.00
$
47.00
Estimated cost per unit
Direct materials
$
5.25
$
7.75
Direct labor...
MSI’s educational products are currently sold without any supplemental materials. The company is considering the inclusion...
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
CD
with Instructional Materials
Estimated demand
25,000
units
25,000
units
Estimated sales price
$
21.00
$
36.00
Estimated cost per unit
Direct materials
$
1.75
$
2.25
Direct labor
3.00...
MSI’s educational products are currently sold without any supplemental materials. The company is considering the inclusion...
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
CD
with Instructional Materials
Estimated demand
25,000
units
25,000
units
Estimated sales price
$
21.00
$
36.00
Estimated cost per unit
Direct materials
$
1.75
$
2.25
Direct labor
3.00...
MSI’s educational products are currently sold without any supplemental materials. The company is considering the inclusion...
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 CD with Instructional Materials
Estimated demand 31,000 units 31,000 units Estimated sales price $
27.00 $ 42.00 Estimated cost per unit Direct materials $ 4.75 $
5.25 Direct labor 6.00...
MSI’s educational products are currently sold without any supplemental materials. The company is considering the inclusion...
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
CD with Instructional Materials
Estimated demand
29,000
units
29,000
units
Estimated sales price
$
25.00
$
40.00
Estimated cost per unit
Direct materials
$
3.75
$
4.25
Direct labor
5.00...
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