The following information is for X Company\'s two products, A and B: Product A P
ID: 2463561 • Letter: T
Question
The following information is for X Company's two products, A and B:
Product A Product B
Revenue $93,000 $95,000
Total variable costs 55,800 57,000
Total contribution margin $37,200 $38,000
Total fixed costs
Avoidable 14,550 28,269
Unavoidable 14,550 24,081
Profit $8,100 $-14,350
7. If X Company drops Product B because it shows a loss, what will be the effect on firm profits?
8. Assume that if X Company drops Product B, it can use the vacant space to increase sales of Product A by $36,100, but $4,600 of additional fixed costs will be incurred. This use of the vacant space will result in an increase in X Company's profits of
Explanation / Answer
7) Product B is discontinued Product A Product B Total Revenue 93000 Tital variable cost 55800 60 Total contribution margin 37200 Total Avoidable fixed cost 14550 Unavoidable fixed cost 14550 24081 Profit/(Loss) 8100 -24081 -15981 When Proct B is not discontinued , the loss of the company is 8100 - 14350 = -6250 After Product B is discontinued , loss of the company is -15981 8) Product A Product B Total Revenue (93000 +36100) 129100 Tital variable cost (60%) 77460 Total contribution margin 51640 Total Avoidable fixed cost 14550 Unavoidable fixed cost 19150 24081 Profit/(Loss) 17940 -24081 -6141 In this scenario , the loss would decrease to 6141 from 15981
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.