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MSI’s educationalproducts are currently sold without any supplemental materials. Thecompany is considering the inclusion of instructional materialssuch as an overhead slide presentation, potential test questions,and classroom bulletin board materials for teachers. A summary ofthe expected costs and revenues for MSI’s two optionsfollows:

	CDOnly				CDwith Instructional Materials
Estimateddemand			41,000	units			41,000	units
Estimated salesprice		$	25.00			$	52.00
Estimated costper unit
Directmaterials		$	1.50			$	1.75
Directlabor			2.00				5.00
Variablemanufacturing overhead			2.00				5.25
Fixedmanufacturing overhead			2.00				2.00
Unitmanufacturing cost		$	7.50			$	14.00
Additionaldevelopment cost						$	105,000

  
Required:
1. Based on the given data, Compute the increase ordecrease in profit that would result if instructional materialswere added to the CDs.



2. Should MSI add the instructional materials orsell the CDs without them?

	Add theInstructional Materials
	Sell the CDswithout Instructional Materials

  
3-a. Suppose that the higher price of the CDs withinstructional materials is expected to reduce demand to 21,000units. Complete the table given below based on Requirement 1 and 2data.



3-b. Should MSI add the instructional materials orsell the CDs without them?

	Sell the CDswithout Instructional Materials
	Add theInstructional Materials