Dropping a Product line

SoccerBoss
Category:
Accounting
Price: $10 USD

Question description

The following information is for X Company's two products, A and B:

Product AProduct B
Revenue$87,000 $87,000 
Total variable costs48,720 48,720 
Total fixed costs59,860 32,700 
Profit$-21,580 $5,580 

$46,092 of Product A's fixed costs are unavoidable; $29,430 of Product B's fixed costs are unavoidable. Because Product A appears to be losing money, X Company is considering dropping it. If it does, it can use the freed-up resources to increase sales of Product B by $23,900, but $7,800 of additional fixed costs will be incurred. If X Company drops Product A and increases Product B sales, firm profits will fall by

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(Top Tutor) Daniel C.
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School: University of Virginia
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