Business, 02.04.2021 16:00 nkidane2802

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 26,000 units 26,000 units
Estimated sales price $22.00 $37.00
Estimated cost per unit
Direct materials $2.25 $2.75
Direct labor 3.50 6.50
Variable manufacturing overhead 3.50 6.75
Fixed manufacturing overhead 3.00 3.00
Unit manufacturing cost $12.25 $19.00
Additional development cost $105,000

Required:
a. Based on the given data, Compute the increase or decrease in profit that would result if instructional materials were added to the CDs.
b. Should MS add the instructional materials sell the COs without them?
c. Should MSI add the materials sell the COs Without them?

Answers: 3

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