Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The following income statement is for X Company's two products, A and B: Product A Product B Revenue $88,000 $91,000 Total variable costs 44,880 50,960

The following income statement is for X Company's two products, A and B:

Product A Product B
Revenue $88,000 $91,000
Total variable costs 44,880 50,960
Total contribution margin $43,120 $40,040
Total fixed costs
Avoidable 29,014 12,888
Unavoidable 27,876 12,382
Profit $-13,770 $14,770

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 $31,900, with $4,400 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

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions