The following information applies to the questions displayed below] Morning Sky,

Question

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

Answer 1. Statement of Net Incremental Profit If POP produst is Eliminated Incremental Revenue Savings in Fixed Costs     4,100.00 Incremental Cost Loss of Contribution - POP Product     6,000.00 Net Incremental Profit (Loss) (1,900.00) Answer 2. No, since it will decrease the net income by $1,900 Answer 3. Statement of Net Incremental Profit If POP produst is Eliminated Incremental Revenue Savings in Fixed Costs     4,100.00 Savings in Common Fixed Costs     2,500.00     6,600.00 Incremental Cost Loss of Contribution - POP Product     6,000.00 Net Incremental Profit (Loss)         600.00 Answer 4. Yes, since it will increase the net income by $600

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