- Msi Is Considering Eliminating A Product From Its Toddletown Tours Collection This Collection Is Aimed At Children One 1 (179.57 KiB) Viewed 11 times
2. Should MSI drop the POP product?
3-a. Calculate the incremental effect onprofit if the POP product is eliminated. Suppose that $4,000 of thecommon fixed costs could be avoided if the POP product line wereeliminated.
3-b. Should MSI drop the POPproduct?
show your work please !thank you
MSI is considering eliminating a product from its ToddleTown Tours collection. This collection is aimed at children one to three years of age and includes "tours" of a hypothetical town. Two products, The Pet Store Parade and The Grocery Getaway, have impressive sales. However, sales for the third CD in the collection, The Post Office Polka, have lagged the others. Several other CDs are planned for this collection, but none is ready for production. MSI's information related to the ToddleTown Tours collection follows: Sales revenue Variable costs Segmented Income Statement for MSI'S ToddleTown Tours Product Lines Contribution margin Less: Direct Fixed costs Segment margin Less: Common fixed costs* Net operating income (loss) Post Office Grocery Getaway Polka Pet Store Parade $65,000 $60,000 $22,000 25,000 14,000 $35,000 $ 8,000 Total $147,000 68,000 29,000 $36,000 5,400 $ 79,000 4,000 4,200 13,600 $31,000 $ 3,800 $ 65,400 12,000 4,400 29,400 $17,600 $19,000 $ (600) $ 36,000 $30,600 13,000 *Allocated based on total sales revenue. MSI has determined that elimination of the Post Office Polka (POP) program would not impact sales of the other two items. The remaining fixed overhead currently allocated to the POP product would be redistributed to the remaining two products. Required: