Question
A company has two different products that are sold in different markets. Financial data are asfollows: Product A Product B Total Revenue $ 17 comma
A company has two different products that are sold in different markets. Financial data are asfollows:
Product A
Product B
Total
Revenue
$ 17 comma 000
$17,000
$ 9 comma 300
$9,300
$ 26 comma 300
$26,300
Variable cost
(8 comma 000
8,000)
(9 comma 800
9,800)
(17 comma 800
17,800)
Fixed cost(allocated)
(2 comma 000
2,000)
(2 comma 200
2,200)
(4 comma 200
4,200)
Operating income(loss)
$ 7 comma 000
$7,000
$(2 comma 700
2,700)
$ 4 comma 300
$4,300
Assume that fixed costs of $ 1 comma 000
$1,000 could be eliminated if Product B was dropped. Assume furthermore that dropping one product would not impact sales of the other. If Product B isdropped, what would be the impact on total operating income of thecompany?
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