A company has two different products that are sold in different markets. Financial data are as follows: Product A Product B Total Revenue $ 15 comma 000 $ 9 comma 400 $ 24 comma 400 Variable cost (7 comma 000 ) (9 comma 800 ) (16 comma 800 ) Fixed cost (allocated) (1 comma 000 ) (2 comma 100 ) (3 comma 100 ) Operating income (loss) $ 7 comma 000 $ (2 comma 500 ) $ 4 comma 500 Assume that fixed costs are all unavoidable and that dropping one product would not impact sales of the other. If Product B is dropped, what would be the impact on total operating income of the company?

Question

Business

Martin Cherry

6 June, 21:02

A company has two different products that are sold in different markets. Financial data are as follows: Product A Product B Total Revenue $ 15 comma 000 $ 9 comma 400 $ 24 comma 400 Variable cost (7 comma 000 ) (9 comma 800 ) (16 comma 800 ) Fixed cost (allocated) (1 comma 000 ) (2 comma 100 ) (3 comma 100 ) Operating income (loss) $ 7 comma 000 $ (2 comma 500 ) $ 4 comma 500 Assume that fixed costs are all unavoidable and that dropping one product would not impact sales of the other. If Product B is dropped, what would be the impact on total operating income of the company?

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Answers (1)

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Payton Lutz · Answer 1

Effect on income = $400 increase

Explanation:

Giving the following information:

Product A Product B Total

Revenue $ 9,400

Variable cost (9,800 )

Fixed cost (allocated) (2,100 )

Operating income (loss) $ (2,500 )

Effect on income = operating income - fixed costs

Effect on income = - 2,500 + 2,500 = 400 increase