Required informationE7-6 through E7-9.[The following information applies to the questions displayed below.]Morning Sky, Incorporated (MSI), manufactures and sells computer games. The company has several product lines basedon the age range of the target market. MSI sells both individual games as well as packaged sets. All games are in CDformat, and some utilize accessories such as steering wheels, electronic tablets, and hand controls. To date, MSI hasdeveloped 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 ofcomputers and the incorporation of computer activities into junior high and elementary school curriculums has led to asignificant increase in sales to younger children. MSI has always included games for younger children but now wants toexpand its business to capitalize on changes in the industry. The company currently has excess capacity and isinvestigating several possible ways to improve profitability.E7-8 (Algo) Analyzing Keep-or-Drop Decision [LO 7-2, 7-5]MSI is considering eliminating a product from its ToddleTown Tours collection. This collection is aimed at children one to three years ofage and includes "tours" of a hypothetical town. Two products, The Pet Store Parade and Grocery Getaway, have impressive sales.However, sales for the third CD in the collection, Post Office Polka (POP), have lagged the others. Several other CDs are planned forthis collection, but none is ready for production.MSI's information related to the ToddleTown Tours collection follows:Sales revenueVariable costsContribution marginLess: Direct Fixed costsSegment marginLess: Common fixed costs*Net operating income (loss)Segmented Income Statement for MSI'sToddle Town Tours Product LinesPet StoreParade$ 145,00061,000$ 84,0008,600$ 75,4007,250GroceryGetawayPost OfficePolka$ 140,00057,000Total$ 323,000152,000$ 83,0008,800$ 74,2007,000$ 38,00034,000$ 4,0003,600$ 4001,900$ 68,150$ 67,200$ (-1,500)$ 171,00021,000$ 150,00016,150$ 133,850*Allocated based on total sales revenue.MSI has determined that elimination of the Post Office Polka (POP) program would not impact sales of the other two items. Theremaining fixed overhead currently allocated to the POP product would be redistributed to the remaining two products.Required:1. Calculate the incremental effect on profit if the POP product is eliminated.2. Should MSI drop the POP product?3-a. Calculate the incremental effect on profit if the POP product is eliminated. Suppose that $1,200 of the common fixed costs couldbe avoided if the POP product line were eliminated.3-b. Should MSI drop the POP product?

A company sells multiple products and thus, there might be some products that might bring losses to…

MSI's information related to the ToddleTown Tours collection follows: Sales revenue Variable costs Contribution margin Less: Direct Fixed costs Segment margin Less: Common fixed costs* Net operating income (loss) Segmented Income Statement for MSI's Toddle Town Tours Product Lines Pet Store Parade $145,000 61,000 $ 84,000 8,600 $ 75,400 7,250 Grocery Getaway $ 140,000 57,000 $ 83,000 8,800 $ 74,200 7,000 $ 68,150 $ 67,200 Post Office Polka $ 38,000 34,000 $ 4,000 3,600 $ 400 1,900 $ (-1,500) Total $ 323,000 152,000 $ 171,000 21,000 $ 150,000 16,150 $ 133,850 *Allocated based on total sales revenue. MSI has determined that elimination of the Post Office Polka (POP) program would not impact sales of the other two items. The remaining fixed overhead currently allocated to the POP product would be redistributed to the remaining two products. Required: 1. Calculate the incremental effect on profit if the POP product is eliminated. 2. Should MSI drop the POP product? 3-a. Calculate the incremental effect on profit if the POP product is eliminated. Suppose that $1,200 of the common fixed costs could be avoided if the POP product line were eliminated. 3-b. Should MSI drop the POP product?

MSI's information related to the ToddleTown Tours collection follows: Sales revenue Variable costs Contribution margin Less: Direct Fixed costs Segment margin Less: Common fixed costs* Net operating income (loss) Segmented Income Statement for MSI's Toddle Town Tours Product Lines Pet Store Parade $145,000 61,000 $ 84,000 8,600 $ 75,400 7,250 Grocery Getaway $ 140,000 57,000 $ 83,000 8,800 $ 74,200 7,000 $ 68,150 $ 67,200 Post Office Polka $ 38,000 34,000 $ 4,000 3,600 $ 400 1,900 $ (-1,500) Total $ 323,000 152,000 $ 171,000 21,000 $ 150,000 16,150 $ 133,850 *Allocated based on total sales revenue. MSI has determined that elimination of the Post Office Polka (POP) program would not impact sales of the other two items. The remaining fixed overhead currently allocated to the POP product would be redistributed to the remaining two products. Required: 1. Calculate the incremental effect on profit if the POP product is eliminated. 2. Should MSI drop the POP product? 3-a. Calculate the incremental effect on profit if the POP product is eliminated. Suppose that $1,200 of the common fixed costs could be avoided if the POP product line were eliminated. 3-b. Should MSI drop the POP product?

Financial Accounting

15th Edition

ISBN:9781337272124

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter5: Accounting Systems

Section: Chapter Questions

Problem 24E: For each of the following companies, determine what they primarily sell and whether their e-commerce...

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Required information [The following information applies to the questions displayed below.]Morning Sky, Inc. (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…
Required information [The following information applies to the questions displayed below.]Morning Sky, Inc. (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…
Required information [The following information applies to the questions displayed below.]Morning Sky, Inc. (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…
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.…
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.…
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.…
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.…
Morning Sky, Inc. (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 is…
Morning Sky, Inc. (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 is…
Morning Sky, Inc. (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…
Morning Sky, Inc. (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…
Morning Sky, Inc. (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 is…