A Company Has Two Different Products That Sell to Separate

question 112

Multiple Choice

A company has two different products that sell to separate markets. Financial data are as follows:
$$\begin{array} { | l | r | r | r | } \hline & \text { Product A } & \text { Product B } &{ \text { Total } } \\\hline \text { Reverue } & \$ 12,000 & \$ 8,000 & \$ 20,000 \\\hline \text { Variable cost } & ( \$ 7,500 ) & ( \$ 8,100 ) & ( \$ 15,600 ) \\\hline \text { Fixed cost (allocated) } & ( \$ 3,000 ) & ( \$ 1,000 ) & ( \$ 4,000 ) \\\hline \text { Operating income } & \$ 1,500 & ( \$ 1,100 ) & \$ 400 \\\hline\end{array}$$
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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 the impact be on total operating income?

• A) Increase $1,100
• B) Increase $100
• C) Decrease $1,100
• D) Decrease $100

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Definitions:

Inducible Operon

A segment of DNA in which the expression of genes is increased in response to specific environmental stimuli.

Catabolic Pathway

A metabolic pathway that breaks down molecules into smaller units, releasing energy.

Bacterial Enzymes

Enzymes produced by bacteria that catalyze chemical reactions, involved in processes such as metabolism, DNA replication, and the degradation of substances.

Operon

A functional unit of DNA containing a group of genes controlled by a single promoter, used by prokaryotes to regulate gene expression efficiently.