The following information is for X Company\'s two products, A and B, last year:
ID: 2574174 • Letter: T
Question
The following information is for X Company's two products, A and B, last year: Product A Product B Sales Total variable costs Total fixed costs Profit $86,500 $92,580 48,142 59,540 $6,635 $-15,102 49,305 30,560 for Product B, x analysis reveals that $5,830 of Product A's fixed costs and $28,820 of Product B's fixed costs are common costs that the company allocates to the two products. 7. If X Company drops Product B, company profits will change by Tries 0/5 8. Assume that sales of Product A can be increased by $17,310 if Product B is dropped. What will be the effect of this increase on company profits?Explanation / Answer
Dear Student Thank you for using Chegg Please find below the answer and please give thumbs up Statementshowing Computations Paticulars Product A Product B Total Sales 86,500.00 92,580.00 179,080.00 Less Variable Expenses (49,305.00) (48,142.00) (97,447.00) Contribution Margin 37,195.00 44,438.00 81,633.00 Fixed cost (30,560.00) (59,540.00) (90,100.00) Net operating income 6,635.00 (15,102.00) (8,467.00) 7) Paticulars Product A Product B Total Sales 86,500.00 86,500.00 Less Variable Expenses (49,305.00) (49,305.00) Contribution Margin 37,195.00 - 37,195.00 Fixed cost (30,560.00) (28,820.00) (59,380.00) Net operating income 6,635.00 (28,820.00) (22,185.00) If company drops product B profit will decrease by 13,718 (-8467 - (-22185)) 8) Paticulars Product A Product B Total Sales 103,810.00 103,810.00 Less Variable Expenses (59,171.70) (59,171.70) Contribution Margin 44,638.30 - 44,638.30 Fixed cost (30,560.00) (28,820.00) (59,380.00) Net operating income 14,078.30 (28,820.00) (14,741.70) If company drops product B profit will decrease by 6,274.70 (-8467 - (-14741))
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