A Company Has Two Different Products That Sell to Separate

question 133

True/False

A company has two different products that sell to separate markets.Financial data are as follows:
$$\begin{array} { | l | r | r | r | } \hline & \textbf { Product A } & \textbf { Product B } & { \textbf { Total } } \\\hline \text { Revenue } & \$ 16,000 & \$ 9,200 & \$ 25,200 \\\hline \text { Variable costs } & ( 6,000 ) & ( 9,300 ) & ( 15,300 ) \\\hline \text { Fixed costs (allocated) } & \underline{( 3,000 )} & \underline{( 900 )} & \underline{( 3,900 )} \\\hline \text { Operating income (loss) } & \underline{\$ 7,000} & \underline{\$ ( 1,000 )} & \underline{\$ 6,000} \\\hline\end{array}$$ Assume that fixed costs are all unavoidable and that dropping one product would not impact sales of the other.Because the contribution margin of Product B is negative,it should be dropped.

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Definitions:

Decision Making

The cognitive process of selecting a course of action from multiple alternatives.

Economist

A professional who studies, teaches, or practices economics, the science concerned with the production, distribution, and consumption of goods and services.

Stroop Effect

A phenomenon demonstrating the cognitive interference where the brain's reaction time slows down when it needs to deal with conflicting information.

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