The following information is for X Company\'s two products, A and B: 7. If X Com

Question

The following information is for X Company's two products, A and B:

7. If X Company drops Product A because it shows a loss, what will be the effect on firm profits?

8. Assume that if X Company drops Product A, it can use the vacant space to increase sales of Product B by $27,400, but $4,200 of additional fixed costs will be incurred. This use of the vacant space will result in an increase in X Company's profits of ?

Product A Product B Revenue $91,000    $86,000    Total variable costs   51,870      51,600    Total contribution margin $39,130    $34,400    Total fixed costs    Avoidable 31,698    18,405       Unavoidable   21,132      13,885    Profit $-13,700    $2,110   

Explanation / Answer

7. Firm profit will be $ 2,110

8. Increse in Sales:                  $ 27,400

   Less: Increse in fixed costs: ($4,200)

   Increase in X Company's profits: $23,200

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.