The following information is for X Company\'s two products, A and B, last year:
ID: 2574358 • Letter: T
Question
The following information is for X Company's two products, A and B, last year:
Product A Product B
Sales $87,870 $92,940
Total variable costs 45,692 55,764
Total fixed costs 61,770 30,280
Profit $-19,592 $6,896
Because of the reported loss for Product A, X Company is considering dropping it. Further analysis reveals that $28,940 of Product A's fixed costs and $6,300 of Product B's fixed costs are common costs that the company allocates to the two products.
7. If X Company drops Product A, company profits will change by___________?
8. Assume that sales of Product B can be increased by $18,690 if Product A is dropped. What will be the effect of this increase on company profits?
Explanation / Answer
7. If X Company drops Product A, company profits will change by $9,348? (profit will be decreased)
8. Assume that sales of Product B can be increased by $18,690 if Product A is dropped. What will be the effect of this increase on company profits?
Answer; profit will decrease by $ 1,872
Product A Product B Total Sales $ - $ 92,940 $ 92,940 Total variable Cost $ - $ 55,764 $ 55,764 Total Fixed Cost $ 28,940 $ 30,280 $ 59,220 Profit/(loss) $ (28,940) $ 6,896 $ (22,044) Current profit/ (loss) $ (19,592) $ 6,896 $ (12,696) Change in profit/ (loss) $ (9,348)Related Questions
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