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 36,000 units $ 30.00 $ 5.25 7.50 7.50 8.00 $ 28.25 Instructional Materials 36,000 units $ 47.00 $ 7.75 11.50 10.75 8.00 $ 38.00 $ 105,000 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 18,000 units. Complete the table given below based on this scenario. 3-b. Should MSI add the instructional materials or sell the CDs without them?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Morning Sky, Incorporated (MSI), manufactures and sells computer games. The company has several product lines based on the age range of the target market. MSI sells both individual games as well as packaged sets. All games are in CD format, and some utilize accessories such as steering wheels, electronic tablets, and hand controls. To date, MSI has developed and manufactured all the CDs itself as well as the accessories and packaging for all of its products.
The gaming market has traditionally been targeted at teenagers and young adults; however, the increasing affordability of computers and the incorporation of computer activities into junior high and elementary school curriculums has led to a significant increase in sales to younger children. MSI has always included games for younger children but now wants to expand its business to capitalize on changes in the industry. The company currently has excess capacity and is investigating several possible ways to improve profitability.
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:
![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 18,000 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.
1
Req 2
Sales Revenue
Variable Costs
Req 3A
Based on the given data, compute the increase or decrease in profit that would result if instructional materials were added to
the CDs.
Contribution Margin
Additional Development Costs
Differential Profit (Loss)
Req 3B
CD Only
< Req 1
CD with Instructional
Materials
Incremental
Req 2 >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffd48c2f6-d8ed-44ab-aac4-15122cd7fb3d%2F4dbae2fe-43b4-4052-b309-361ddac67b43%2Fcr79p0d_processed.png&w=3840&q=75)
![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
36,000 units
$ 30.00
$ 5.25
7.50
7.50
8.00
$ 28.25
CD with
Instructional
Materials
36,000 units
$ 47.00
$ 7.75
11.50
10.75
8.00
$ 38.00
$ 105,000
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 18,000 units. Complete the
table given below based on this scenario.
3-b. Should MSI add the instructional materials or sell the CDs without them?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffd48c2f6-d8ed-44ab-aac4-15122cd7fb3d%2F4dbae2fe-43b4-4052-b309-361ddac67b43%2Fb91z6yu9_processed.png&w=3840&q=75)
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