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Comp Inc. sells three products. Income statement information for the three products for the most recent year is given below: Product A Product B Product
Comp Inc. sells three products. Income statement information for the three products for the most recent year is given below: Product A Product B Product C Selling price per unit ..... $25 $20 $18 Costs: Variable costs ............ $130,000 $156,000 $ 72,000 Advertising ............... $ 23,500 $ 28,600 $ 23,400 Rent ...................... $ 12,100 $ 14,400 $ 12,900 Supervisor's salary ....... $ 33,100 $ 31,200 $ 31,400 Property taxes ............ $ 7,000 $ 3,000 $ 2,000 Units sold ................. 7,000 13,000 10,000 The rent is allocated to the three products equally and the property taxes are allocated based on the square footage each product uses in the factory. Comp Inc. is considering eliminating Product A. If Product A is eliminated, the space currently being used to produce Product A can be rented out for $17,000 per year. Calculate the number of units of Product A that would need to be sold next year in order for Comp Inc. to be economically indifferent between dropping and keeping Product A.
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