Question

The Grocery Ge cieing te helica trom a product trom ues tours tve thrd CD in the colecin, The Pasl Offie Pulka, ae laget the others. Several oher CDs a piarimted fer this colleclicam, bul name is reacty far production o the Toddle Toan Tours colecion ftoll MSI's Infonmation related to the ToddeTown Tours colection follows Segmented Income Statement for MSI' Toddc Town Tours Product L Pat Store Groccry Officc Sales revenuc Variahla cass 訂5,000 .訂0000 Contrbution margih Sagmant margin L Comman xAd costs Net operating incume (lus:) Alccated based on total sales dollars MSI has detemined hat elimination of the Post Omce Polka (POP) program would not impact sales of the other two items. The remaining fixed ovemead currentiy alocated to the POP product would be redistribured to the remaining two products. 1. Cabs tee the Incremental tetext n proft t th贮代IP product is elrinalen! 2. Should MS drap the POP product? O Yes 3 a Cale Inte t พิ incremental e ecr ǎn prot t the POP produe' is 쉬ǐ inned Sinnse mM フ IXIO of the common toed oasts coïd be voided r the POP product line were eliminatac 3-b. Should MSI drop the POP product? O Yes O No

Answer 1

1

Profit will decrease by the amount of segment margin of POP

Effect on Profit $500 decrease

2

No, POP product should not be dropped

3a

Profit will increase by the amount of common fixed costs avoidable less segment margin

Profit increase = 2000-500 = $1500

Effect on Profit $1500 increase

b

Yes, MSI should drop the POP product