Question
The following are the budgeted profit functions for X Company's two products, A and B, for next year: Product A: P = .51 (R) -
The following are the budgeted profit functions for X Company's two products, A and B, for next year:
Product A: P = .51 (R) - $58,280
Product B: P = .42 (R) - $24,820
where R is revenue. Budgeted revenue for the two products are $90,000 and $89,000, respectively. Avoidable fixed costs for the two products are $35,551 and $14,644, respectively.
The company is considering dropping Product A 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 B by $37,400, but that will require $2,600 of additional fixed costs.
If X Company drops A and increases revenue from B, firm profits will change by
A: $1,692 | B: $1,912 | C: $2,161 | D: $2,441 | E: $2,759 | F: $3,117 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started