The following information is for X Company\'s two products, A and B: 7. If X Com
ID: 2463193 • Letter: T
Question
The following information is for X Company's two products, A and B:
7. If X Company drops Product B because it shows a loss, what will be the effect on firm profits?
41400-25525=-15855 <--Correct answer for question 7
8. Assume that if X Company drops Product B, it can use the vacant space to increase sales of Product A by $29,400, but $4,200 of additional fixed costs will be incurred. This use of the vacant space will result in an increase in X Company's profits of:________?
My work for question 8:
36,980-16,295-16,295-25,545=-21155
29,400-4,200-21155=4045 <--Incorrect answer
Need correct answer for question 8, please show work.
Product A Product B Revenue $86,000 $92,000 Total variable costs 49,020 50,600 Total contribution margin $36,980 $41,400 Total fixed costs Avoidable 16,295 25,545 Unavoidable 16,295 25,545 Profit $4,390 $-9,690Explanation / Answer
7.If X Company drops Product B because it shows a loss the profit of the firm will decrease by $15,855 =(21,155)-($5300)
8. The use of the vacant space will result in an increase in X Company's profits of $25,200 = $4045 - ($21,155)
Product A Product B Total Product A (Decreas)e/Increase in profit Revenue 86,000 92,000 178,000 86,000 Total variable costs 49,020 50,600 99,620 49,020 Total contribution margin 36,980 41,400 78,380 36,980 Total fixed costs - Avoidable 16,295 25,545 41,840 16,295 Unavoidable 16,295 25,545 41,840 41,840 Profit 4,390 (9,690) (5,300) (21,155) (15,855)Related Questions
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