Question
The following are the budgeted profit functions for X Company's two products, A and B, for next year: Product A: P = .44 (R) -
The following are the budgeted profit functions for X Company's two products, A and B, for next year:
Product A: P = .44 (R) - $26,890
Product B: P = .53 (R) - $58,080
where R is revenue. Budgeted revenue for the two products are $95,000 and $94,000, respectively. Unavoidable fixed costs for the two products are $9,949 and $26,136, respectively.
The company is considering dropping Product B because it appears to be losing money. If it does, the resulting freed-up resources can be used to increase revenue from sales of Product A by $37,400, but that will require $3,000 of additional fixed costs.
If X Company drops B and increases revenue from A, firm profits will change by
A: $-4,420 | B: $-5,525 | C: $-6,906 | D: $-8,633 | E: $-10,791 | F: $-13,489 |
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