The following information is for X Company\'s two products, A and B: Product A P
ID: 2461923 • Letter: T
Question
The following information is for X Company's two products, A and B:
Product A Product B
Revenue $90,000 $90,000
Total variable costs 36,900 44,100
Total contribution margin 36,900 44,100
Total fixed costs
Avoidable 16965 29635
Unavoidable 12285 27355
Profit $7650 $-12890
1. If X Company drops Product B because it shows a loss, what will be the effect on firm profits?
2. Assume that if X Company drops Product B, it can use the vacant space to increase sales of Product A by $36,800, but
$3,800 of additional fixed costs will be incurred. This use of the vacant space will result in an increase in X Company's profits of
Please show your work and need help.
Explanation / Answer
1. If X Company drops Product B because it shows a loss, what will be the effect on firm profits?
Assume that if X Company drops Product B, it can use the vacant space to increase sales of Product A by $36,800, but
$3,800 of additional fixed costs will be incurred. This use of the vacant space will result in an increase in X Company's profits of
A B Overall profit Revenue 90000 0 90000 variable costs 53100 0 53100 Contribution Margin 36900 0 36900 Fixed Cost 29250 27355 56605 Profit 7650 -27355 -19705Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.