A Company Has Two Different Products That Are Sold in Different

question 98

Multiple Choice

A company has two different products that are sold in different markets.Financial data are as follows: $$\begin{array} { | l | r | r | r | } \hline & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Revenue } & \$ 15,000 & \$ 9400 & \$ 24,400 \\\\\hline \text { Variable cost } & ( 7000 ) & ( 9800 ) & ( 16,800 ) \\\\\hline \text { Fixed cost (allocated) } & \underline { ( 3000 ) } & \underline { ( 2100 ) } & \underline { ( 5100 ) } \\\\\hline \text { Operating income (loss) } & \underline { \$ 5000} & \underline { \$ ( 2500 ) } & \underline { \$ 2500} \\\\\hline\end{array}$$ 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 $400
• C)decreases by $2100
• D)decreases by $400

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Definitions:

Puffballs

Puffballs are a type of fungus belonging to the division Basidiomycota, characterized by their globe-shaped spore cases that release spores through an aperture when mature.

Bracket Fungi

Fungi that grow shelf-like on trees and logs, often forming tough, woody fruiting bodies.

Zoosporangium

Structure in which zoospores form.

Zoospore

A flagellated motile spore produced asexually by chytrids, certain algae, water molds, and other protists.