MSIs 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 MSIs two options follows:
CD Only CD with Instructional Materials
Estimated demand units units
Estimated sales price $ $
Estimated cost per unit
Direct materials $ $
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Unit manufacturing cost $ $
Additional development cost $
Required:
Based on the given data, compute the increase or decrease in profit that would result if instructional materials were added to the CDs
Should MSI add the instructional materials or sell the CDs without them?
a Suppose that the higher price of the CDs with instructional materials is expected to reduce demand to units. Complete the table given below based on this scenario.
b Should MSI add the instructional materials or sell the CDs without them?
