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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 52,780
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 | 52,780 | ||
Total contribution margin | $40,500 | $38,220 | ||
Total fixed costs | ||||
Avoidable | 31,082 | 16,605 | ||
Unavoidable | 22,508 | 14,725 | ||
Profit | $-13,090 | $6,890 |
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 $31,000, with $4,600 of additional fixed costs, what will be the effect on firm profits?
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