A Company Has Two Different Products That Are Sold in Different

question 142

Multiple Choice

A company has two different products that are sold in different markets.Financial data are as follows: $$\begin{array} { | l | r | r | r | } \hline & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Revenue } & \$ 18,000 & \$ 9300 & \$ 27,300 \\\hline \text { Variable cost } & ( 8000 ) & ( 9900 ) & ( 17,900 ) \\\hline \text { Fixed cost (allocated) } & \underline { ( 1000 ) } & \underline { ( 2100 } ) & \underline { ( 3100 ) } \\\hline \text { Operating income (loss) } & \$ 9000 & \$ ( 2700 ) & \$ 6300 \\\hline\end{array}$$ 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?

• A) increases by $2100
• B) increases by $600
• C) decreases by $2100
• D) decreases by $600

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Definitions:

Major Organic Products

Primary substances formed as a result of organic reactions, often the focus of synthesis goals.

Major Product

The compound that is formed in the greatest yield in a chemical reaction, as predicted by the reaction mechanism.

Reaction

A process in which substances interact to form one or more new substances with different properties.

β-lactams

A class of antibiotics that include penicillins, characterized by a four-membered lactam ring.