A Company Has Two Different Products That Are Sold in Different

question 43

Multiple Choice

A company has two different products that are sold in different markets. Financial data are as follows: $$\begin{array} { | l | r | r | r | } \hline & \text { Product A } & \text { Product B } & { \text { Total } } \\\hline \text { Revenue } & \$ 15,000 & \$ 9,500 & \$ 24,500 \\\hline \text { Variable cost } & ( 9,000 ) & ( 9,800 ) & ( 18,800 ) \\\hline \text { Fixed cost (allocated) } & ( 3,000 ) & ( 2,000 ) & ( 5,000 ) \\\hline \text { Operating income } & \$ 3,000 & ( \$ 2,300 ) & \$ 700 \\\hline\end{array}$$ Assume that fixed costs of $1,000 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 be the impact on total operating income of the company?

• A) increase $1,000
• B) increase $1,300
• C) increase $300
• D) increase $2,000

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Definitions:

Society

A group of individuals who live together in an organized community with shared laws, traditions, and values.

Principal-Agent Problem

A conflict in priorities between a person or group (the agent) acting on behalf of another person or group (the principal).

Job Performance

The level of effectiveness and efficiency with which an individual completes their work tasks and responsibilities.

Correct Actions

Appropriate or effective measures taken to achieve a desired outcome or resolve a specific situation.