The following information is for X Company's two products, A and B, last year: Product A Product B Sales $87,870 $92,940 Total variable costs 45,692 55,764 Total fixed costs 61,770 30,280 Profit $-19,592 $6,896 Because of the reported loss for Product A, X Company is considering dropping it. Further analysis reveals that $28,940 of Product A's fixed costs and $6,300 of Product B's fixed costs are common costs that the company allocates to the two products. 1. If X Company drops Product A, company profits will change by __________. 2. Assume that sales of Product B can be increased by $18,690 if Product A is dropped. What will be the effect of this increase on company profits?
The following information is for X Company's two products, A and B, last year: Product A Product B Sales $87,870 $92,940 Total variable costs 45,692 55,764 Total fixed costs 61,770 30,280 Profit $-19,592 $6,896 Because of the reported loss for Product A, X Company is considering dropping it. Further analysis reveals that $28,940 of Product A's fixed costs and $6,300 of Product B's fixed costs are common costs that the company allocates to the two products. 1. If X Company drops Product A, company profits will change by __________. 2. Assume that sales of Product B can be increased by $18,690 if Product A is dropped. What will be the effect of this increase on company profits?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
The following information is for X Company's two products, A and B, last year:
| Product A | Product B | |
| Sales | $87,870 | $92,940 |
| Total variable costs | 45,692 | 55,764 |
| Total fixed costs | 61,770 | 30,280 |
| Profit | $-19,592 | $6,896 |
Because of the reported loss for Product A, X Company is considering dropping it. Further analysis reveals that $28,940 of Product A's fixed costs and $6,300 of Product B's fixed costs are common costs that the company allocates to the two products.
1. If X Company drops Product A, company profits will change by __________.
2. Assume that sales of Product B can be increased by $18,690 if Product A is dropped. What will be the effect of this increase on company profits?
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