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The following information is for X Company's two products, A and B: Product A Product B Revenue $87,000 $87,000 Total contribution margin 35,670 40,890 Total
The following information is for X Company's two products, A and B:
Product A | Product B | |||
Revenue | $87,000 | $87,000 | ||
Total contribution margin | 35,670 | 40,890 | ||
Total fixed costs | 32,080 | 50,320 | ||
Profit | $3,590 | $-9,430 |
$18,286 of Product A's fixed costs are avoidable; $28,682 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 $36,800. Accompanying the sales increase will be a fixed cost increase of $3,600. If X Company drops Product B and increases Product A sales, what will be the effect on firm profits?
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