The following information is for X Company\'s two products, A and B: Product A P
ID: 2504482 • Letter: T
Question
The following information is for X Company's two products, A and B: Product A Product B Total contribution margin $36,980 $42,300 Contribution margin rate 43% 45% Total fixed costs $30,080 $54,980 Profit $6,900 $-12,680$24,064 of Product A's fixed costs are unavoidable; $44,534 of Product B's fixed costs are unavoidable. X Company is considering dropping Product B. If it does, it can use the freed-up resources to increase sales of Product A by $26,100, but with $2,000 of additional fixed costs. If X Company drops Product B and increases Product A sales, firm profits will change by Product A Product B Total contribution margin $36,980 $42,300 Contribution margin rate 43% 45% Total fixed costs $30,080 $54,980 Profit $6,900 $-12,680
Explanation / Answer
LOSS WILL INCREASE BY $22631 AND HENCE,
PROFIT WILL DECREASE BY $28411
PRODUCT A PRODUCT B TOTAL UNAVOIDABLE FIXED COST -24064 -44534 ADDITIONAL FIXED COST -2000 0 OTHER FIXED COST -6016 0 TOTAL CONTRIBUTION 48203 0 PROFIT 16123 -44534 -28411Related Questions
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