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The following income statement is for X Company's two products, A and B: Product A Product B Revenue $93,000 $85,000 Total variable costs 53,940 51,000
The following income statement is for X Company's two products, A and B:
Product A | Product B | |||
Revenue | $93,000 | $85,000 | ||
Total variable costs | 53,940 | 51,000 | ||
Total contribution margin | $39,060 | $34,000 | ||
Total fixed costs | ||||
Avoidable | 28,286 | 18,266 | ||
Unavoidable | 22,224 | 12,694 | ||
Profit | $-11,450 | $3,040 |
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 $26,000, with $5,000 of additional fixed costs, what will be the effect on firm profits?
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