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Please help in below questions, thank you! 2. Biden Company sells two items, product A and product B. The company is considering dropping product B.
Please help in below questions, thank you!
2. Biden Company sells two items, product A and product B. The company is considering dropping product B. It is expected that sales of product A will increase by 40% as a result. Dropping product B will allow the company to cancel its monthly equipment rental costing S200 per month. The other existing equipment will be used for additional production of product A. One employee earning $500 per month can be terminated if product B production is dropped. Biden's other fixed costs are allocated and will continue regardless of the decision made. A condensed, budgeted monthly income statement with both products follows Sales Direct materials Direct labor Equipment rental Product A S10,000 2,500 2,000 300 Other allocated overhead 1000 $4,200 Product B S 8,000 2,000 1,200 2,600 2,100 S 100 Total $18,000 4,500 3,200 2,900 3,100 S 4,300 Operating income Required A. If dropping product B, what is the total incremental change in revenue? (1 pt.) B. If dropping product B, what is the total incremental change in costs? (1 pt.,) C. If dropping product B, what is the total incremental change in profits? (1 pt.)Step by Step Solution
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