The following information is for X Company\'s two products, A and B, last year:
ID: 2575316 • Letter: T
Question
The following information is for X Company's two products, A and B, last year:
Because of the reported loss for Product A, X Company is considering dropping it. Further analysis reveals that $28,750 of Product A's fixed costs and $6,750 of Product B's fixed costs are common costs that the company allocates to the two products.
7. If X Company drops Product A, company profits will change by
8. Assume that sales of Product B can be increased by $17,890 if Product A is dropped. What will be the effect of this increase on company profits?
Product A Product B Sales $93,000 $94,730 Total variable costs 55,800 53,049 Total fixed costs 52,510 30,410 Profit $-15,310 $11,271Explanation / Answer
Paticulars Product A Product B Total Sales 93,000.00 94,730.00 187,730.00 Less Variable Expenses (55,800.00) (53,049.00) (108,849.00) Contribution Margin 37,200.00 41,681.00 78,881.00 Fixed cost (52,510.00) (30,410.00) (82,920.00) Net operating income (15,310.00) 11,271.00 (4,039.00) Q7 Paticulars Product A Product B Total Sales 94,730.00 94,730.00 Less Variable Expenses (53,049.00) (53,049.00) Contribution Margin - 41,681.00 41,681.00 Fixed cost (28,750.00) (30,410.00) (59,160.00) Net operating income (28,750.00) 11,271.00 (17,479.00) If x company drops product A profits will fall by (13,440) Q8 Paticulars Product A Product B Total Sales 112,620.00 112,620.00 Less Variable Expenses (63,067.44) (63,067.44) Contribution Margin - 49,552.56 49,552.56 Fixed cost (28,750.00) (30,410.00) (59,160.00) Net operating income (28,750.00) 19,142.56 (9,607.44) If x company drops product A profits will fall by (5,568.44)
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