Question
The following information is for X Company's two products, A and B, last year: Product A Product B Sales $85,180 $88,380 Total variable costs 51,108
The following information is for X Company's two products, A and B, last year:
Product A | Product B | ||
Sales | $85,180 | $88,380 | |
Total variable costs | 51,108 | 47,725 | |
Total fixed costs | 28,860 | 75,300 | |
Profit | $5,212 | $-34,645 |
Because of the reported loss for Product B, X Company is considering dropping it. Further analysis reveals that $6,450 of Product A's fixed costs and $26,740 of Product B's fixed costs are common costs that the company allocates to the two products.
7. If X Company drops Product B, company profits will change by ________?
8. Assume that sales of Product A can be increased by $18,240 if Product B is dropped. What will be the effect of this increase on company profits?
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