Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The following income statement is for X Company's two products, A and B: Product A Product B Revenue $90,000 $91,000 Total variable costs 49,500 53,690
The following income statement is for X Company's two products, A and B:
Product A | Product B | |||
Revenue | $90,000 | $91,000 | ||
Total variable costs | 49,500 | 53,690 | ||
Total contribution margin | $40,500 | $37,310 | ||
Total fixed costs | ||||
Avoidable | 32,490 | 14,230 | ||
Unavoidable | 21,660 | 14,230 | ||
Profit | $-13,650 | $8,850 |
If X Company drops Product A because it shows a loss and is able to use the vacant space to increase sales of Product B by $27,500, with $3,400 of additional fixed costs, what will be the effect on firm profits?
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