The following information is for X Company\'s two products, A and B: Product A P
ID: 2461991 • 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.Please give me correct answer plz
Explanation / Answer
Existing
Particualars
Product A
%
Product B
Total
Revenue
90,000
90,000
180,000
Total Variable Costs
53,100
59
45,900
99,000
Total Contribution Margin
36,900
41
44,100
81,000
Total Fixed Cost
Avoidable
16,965
29,635
46,600
Unavoidable
12,285
27,355
39,640
Profit
7,650
(12,890)
(5,240)
If B dropped
Particualars
Product A
%
Product B
Total
Revenue
90,000
90,000
Total Variable Costs
53,100
59
53,100
Total Contribution Margin
36,900
41
36,900
Total Fixed Cost
Avoidable
16,965
16,965
Unavoidable
12,285
27,355
39,640
Profit
7,650
(27,355)
(19,705)
If Product B Dropped Loss Increases better not to drop B
If A Sale Increased
Particualars
Product A
%
Product B
Total
Revenue
126,800
126,800
Total Variable Costs
74,812
59
74,812
Total Contribution Margin
51,988
41
51,988
Total Fixed Cost
Avoidable
16,965
16,965
Unavoidable
16,085
27,355
43,440
Profit
18,938
(27,355)
(8,417)
Even if A sales increases if Product B Dropped Loss Increases better not to drop B
Existing
Particualars
Product A
%
Product B
Total
Revenue
90,000
90,000
180,000
Total Variable Costs
53,100
59
45,900
99,000
Total Contribution Margin
36,900
41
44,100
81,000
Total Fixed Cost
Avoidable
16,965
29,635
46,600
Unavoidable
12,285
27,355
39,640
Profit
7,650
(12,890)
(5,240)
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