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MSIs educational products are currently sold without any supplemental materials. The company is considering the inclusion of
3-b. Should MSI add the instructional materials or sell the CDs without them? Complete this question by entering your answers
Reg 1 Req 2 Reg 3A Req 3B Should MSI add the instructional materials or sell the CDs without them? Should MSI add the instruc
Reg 1 Reg 2 Reg 3 Reg 3B Suppose that the higher price of the CDs with instructional materials is expected to reduce demand t
се RU Ry REN Should MSI add the instructional materials or sell the CDs without them? Should MSI add the instructional materi
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Answer #1

1.

MSI
Particulars CD only CD with instructions material Incremental
Sales Revenue (31000*Sales price) $8,37,000 $13,02,000 $4,65,000
Variable costs (Variable cost per unit*31000) $5,19,250 $7,28,500 $2,09,250
Contribution margin $3,17,750 $5,73,500 $2,55,750
Additional Developmental Costs $0 $1,05,000 $1,05,000
Differential Profit (loss) $3,17,750 $4,68,500 $1,50,750
Solution 2: MSI should add instructions materials.
Solution 3a:
MSI
Particulars CD only CD with instructions material Incremental
Sales Revenue (revised Units*Sales price) $8,37,000 $9,24,000 $87,000
Variable costs (Variable cost per unit*units) $5,19,250 $5,17,000 -$2,250
Contribution margin $3,17,750 $4,07,000 $89,250
Additional Developmental Costs $0 $1,05,000 $1,05,000
Differential Profit $3,17,750 $3,02,000 -$15,750
Solution 3b: MSI should sell the CDs without instructional materials.
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