Question
The following are the budgeted cost functions for X Company's two products, A and B, next year: Product A: P = .41 (R) - $32,780
The following are the budgeted cost functions for X Company's two products, A and B, next year:
Product A: P = .41 (R) - $32,780
Product B: P = .41 (R) - $54,790
Budgeted revenue for the two products are $92,000 and $94,000, respectively. Avoidable fixed costs for the two products are $20,979 and $30,134, respectively. The company is considering dropping Product B because it shows a $16,250 loss for next year. If X Company drops B, it will use the freed-up resources to increase sales of Product A by $16,400, but there will be additional fixed costs of $2,400. If X Company drops B and increases sales of A, firm profits will change by?
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