Questions 7 and 8 refer to the following information:

The following information is for X Company's two products, A and B, last year:

		Product A	Product B
Sales		$94,550	$94,280
Total variable costs		52,948	55,625
Total fixed costs		78,290	31,590
Profit		$-36,688	$7,065

Because of the reported loss for Product A, X Company is considering dropping it. Further analysis reveals that $29,550 of Product A's fixed costs and $6,700 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 $7,138

You are correct. Your receipt no. is 152-3315

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8. Assume that sales of Product B can be increased by $14,030 if Product A is dropped. What will be the effect of this increase on company profits?

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Incorrect.