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MSI is considering eliminating a product from its ToddleTown Tours collection. This collection is aimed at children one to three years of age and includes "tours" of a hypothetical town. Two products, The Pet Store Parade and The Grocery Getaway, have impressive sales. However, sales for the third CD in the collection, The Post Office Polka, have lagged the others. Several other CDs are planned for this collection, but none is ready for production. MSI's information related to the ToddleTown Tours collection follows: $85,000 Segmented Income Statement for MSI's ToddleTown Tours Product Lines Pet Store Grocery Parade Getaway Sales revenue $80,000 Variable costs 37,000 33,000 Contribution margin $48,000 $47,000 Less: Direct Fixed costs 6,200 Segment margin $41,800 $41,800 Less: Corrmon fixed costs* 8,500 8,000 Net operating income (loss) $33,300 $33,800 Post Office Polka $26,000 21,000 $ 5,000 4,800 $ 200 2,600 $(2,400) Total $191,000 91,000 $100,000 16,200 83,800 19,100 64,700 5,200 *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 $2,000 of the common fixed costs could be avoided if the POP product line were eliminated 3-b. Should MSI drop the POP product

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