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The following information is for X Company's two products, A and B: Product A Product B Revenue $91,000 $90,000 Total contribution margin 36,400 43,200 Total
The following information is for X Company's two products, A and B:
Product A | Product B | |||
Revenue | $91,000 | $90,000 | ||
Total contribution margin | 36,400 | 43,200 | ||
Total fixed costs | 32,040 | 55,970 | ||
Profit | $4,360 | $-12,770 |
$17,622 of Product A's fixed costs are avoidable; $33,022 of Product B's fixed costs are avoidable. X Company plans to drop Product B since it shows a loss and increase sales of Product A by $37,700. Accompanying the sales increase will be a fixed costs increase of $4,600. If X Company drops Product B and increases Product A sales, what will be the effect on firm profits?
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