Question

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?

Answer 1

Effect on income= $400 increase

Step-by-step 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