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A company has two different products that sell to separate markets. Financial data are as follows: Product A Product B Total Revenue $16,000 $9,000 $25,000 Variable costs Fixed costs (allocated) Operating income (loss) (7.000) (3,000) $6,000 (9,200) (1,000) S(1,200) (16,200) (4,000) $4,800 me Assume that fixed costs are all unavoidable and that dropping one product would not impact sales of the other. Because the contribution margin of Product B is negative, it should be dropped. M: O True O False il Se

A company has two different products that sell to separate markets. Financial data are as follows: Product A Product B Total Revenue $16,000 $9,000 $25,000 Variable costs Fixed costs (allocated) Operating income (loss) (7.000) (3,000) $6,000 (9,200) (1,000) S(1,200) (16,200) (4,000) $4,800 me Assume that fixed costs are all unavoidable and that dropping one product would not impact sales of the other. Because the contribution margin of Product B is negative, it should be dropped. M: O True O False il Se

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A company has two different products that sell to separate markets. Financial data are as follows: Product A Product B Total Revenue $16,000 $9,000 $25,000 Variable costs Fixed costs (allocated) Operating income (loss) (7.000) (3,000) $6,000 (9,200) (1,000) S(1,200) (16,200) (4,000) me $4,800 Assume that fixed costs are all unavoidable and that dropping one product would not impact sales of the other. Because the contribution margin of Product B is negative, it should be dropped. M: O True O False il Se
Transcribed Image Text:A company has two different products that sell to separate markets. Financial data are as follows: Product A Product B Total Revenue $16,000 $9,000 $25,000 Variable costs Fixed costs (allocated) Operating income (loss) (7.000) (3,000) $6,000 (9,200) (1,000) S(1,200) (16,200) (4,000) me $4,800 Assume that fixed costs are all unavoidable and that dropping one product would not impact sales of the other. Because the contribution margin of Product B is negative, it should be dropped. M: O True O False il Se
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