A Company Has Two Different Products That Sell to Separate

question 31

Multiple Choice

A company has two different products that sell to separate markets. Financial data are as follows: Assume that fixed costs of $500 could be eliminated if product B was dropped; assume furthermore 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 $600
• C)Increase $500
• D)Increase $100

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Definitions:

Balance Budget

A financial statement in which revenues and expenditures are equal, resulting in no deficit or surplus.

GDP

The total market value or monetary sum of all final goods and services produced within a nation's boundaries during a defined timeframe is known as Gross Domestic Product.

Multiplier

In economics, a factor that quantifies the impact of an initial change in spending, income, or investment on the broader economy, amplifying the initial effect.

Inflationary Gap

A macroeconomic term referring to the situation where the demand for goods exceeds the supply, leading to increased prices or inflation.