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The following information is for X Company's two products - A and B: Product A Product B Sales $89,000 $89,000 Total contribution margin 35,600 35,600
The following information is for X Company's two products - A and B:
Product A | Product B | |
Sales | $89,000 | $89,000 |
Total contribution margin | 35,600 | 35,600 |
Fixed costs: | ||
Avoidable | 22,000 | 32,000 |
Unavoidable | 6,000 | 28,000 |
Profit | $7,600 | $-24,400 |
The company is considering dropping Product B because of the $24,400 loss. If X Company drops Product B, it can use the freed-up resources to increase sales of Product A by $12,900. If X Company drops Product B and increases sales of A by $12,900, firm profits will change by
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