Question
The following are the budgeted cost functions for X Company's two products, A and B, next year: Product A: P = .40 (R) - $29,600
The following are the budgeted cost functions for X Company's two products, A and B, next year:
Product A: P = .40 (R) - $29,600
Product B: P = .49 (R) - $54,380
Budgeted revenue for the two products are $94,000 and $91,000, respectively. Avoidable fixed costs for the two products are $19,240 and $32,084, respectively. The company is considering dropping Product B because it shows a $9,790 loss for next year. If X Company drops B, it will use the freed-up resources to increase sales of Product A by $17,900, but there will be additional fixed costs of $2,400. 1) If X Company drops B and increases sales of A, firm profits will change by?
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