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) - $55,690
Product B: P = .41 (R) - $28,400
where R is revenue. Budgeted revenue for the two products are $91,000 and $85,000, respectively. Avoidable fixed costs for the two products are $35,085 and $16,472, 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 $35,500, but that will require $2,000 of additional fixed costs.
If X Company drops A and increases revenue from B, firm profits will change by
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