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The following information is for X Company's two products - A and B: Product A Product B Total contribution margin $35,600 $39,060 Contribution margin rate
The following information is for X Company's two products - A and B:
Product A | Product B | |
Total contribution margin | $35,600 | $39,060 |
Contribution margin rate | 40% | 42% |
Fixed costs | $56,110 | $31,510 |
Profit | $-20,510 | $7,550 |
10% of Product A's fixed costs are allocated; 10% of Product B's fixed costs are allocated. The unallocated fixed costs are directly related to the individual products.
The company is considering dropping Product A because of the $20,510 loss. If X Company drops A, it will use the freed-up resources to increase sales of Product B by $15,000, but there will be additional fixed costs of $2,400. If X Company drops A, firm profits will change by
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