Question
The following are the budgeted profit functions for X Company's two products, A and B, for next year: Product A: P = .54 (R) -
The following are the budgeted profit functions for X Company's two products, A and B, for next year:
Product A: P = .54 (R) - $58,040
Product B: P = .44 (R) - $32,130
where R is revenue. Budgeted revenue for the two products are $85,000 and $90,000, respectively. Unavoidable fixed costs for the two products are $22,055 and $12,852, 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 $35,900, 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 1,680
B 2,100
C 2,625
D 3,281
E 4,101
F 5,126
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