Please answer entirely. The following information applies to the questions displ
ID: 2558872 • Letter: P
Question
Please answer entirely.
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 excess capacity and is investigating several possible ways to improve profitability.Explanation / Answer
1 Incremental revenue 11500 =2300*5 Costs: Direct materials 2645 =2300*1.15 Direct labor 1127 =2300*0.49 Variable manufacturing overhead 4991 =2300*2.17 Modification cost 360 9123 Income(loss) 2377 Profit increases by $2377 2 Yes 3 Incremental revenue 10350 =2300*4.5 Costs: Direct materials 2645 Direct labor 1127 Variable manufacturing overhead 4991 Modification cost 360 9123 Income(loss) 1227 Profit increases by $1227 4 Special order price=12+(360/2300)= $12.16