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The following information is for X Company's two products, A and B: Product A Product B Revenue $94,000 $92,000 Total contribution margin 42,300 40,480 Total
The following information is for X Company's two products, A and B:
Product A | Product B | |||
Revenue | $94,000 | $92,000 | ||
Total contribution margin | 42,300 | 40,480 | ||
Total fixed costs | 52,040 | 28,040 | ||
Profit | $-9,740 | $12,440 |
$29,142 of Product A's fixed costs are avoidable; $14,020 of Product B's fixed costs are avoidable. X Company plans to drop Product A since it shows a loss and increase sales of Product B by $37,200. Accompanying the sales increase will be a fixed cost increase of $4,400. If X Company drops Product A and increases Product B sales, what will be the effect on firm profits?
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