A B C

Units 5,000 6,000 3,000

Selling Price P15 P12 P20

Cost:

Variable P12 P5 P10

Fixed P5 P5 P5

Total Unit Cost P17 P10 P15

Profit (Loss) per unit (P2) P2 P5

Total fixed cost is allocated among the products based on the units produces and sold. The company

does keep inventories. Production is done based on sales orders received from customers.

Required:

a. Which product, if any, should be eliminated

b. Assuming that if production of Product A is discontinued, some customers originally buying A

will shift to Product B. It is estimated that B's sales will go up by 1,000. Fixed cost per unit of

remaining products will increase to P7. Should production and sale of Product A be

discontinued.