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The following information is for X Company's two products, A and B: Product A Product B Revenue $93,000 $90,000 Total contribution margin 39,990 37,800 Total
The following information is for X Company's two products, A and B:
Product A | Product B | |||
Revenue | $93,000 | $90,000 | ||
Total contribution margin | 39,990 | 37,800 | ||
Total fixed costs | 30,430 | 55,990 | ||
Profit | $9,560 | $-18,190 |
$15,215 of Product A's fixed costs are avoidable; $33,034 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 $29,600. Accompanying the sales increase will be a fixed cost increase of $4,800. If X Company drops Product B and increases Product A sales, what will be the effect on firm profits?
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