Clinton Company sells two items, product A and product B. The company is considering dropping product B. It is expected that sales of product A will increase by 405 as a result. Dropping product B will allow the company to cancel its monthly equipment rental costing $100 per month. The other existing equipment will be used for additional production of product A. One employee earning $200 per month can be terminated if product B production is dropped. Clinton's other fixed costs are allocated and will continue regardless of the decision made. A condensed, budgeted monthly income statement with both products follows:
Required:
Prepare an incremental analysis to determine the financial effect of dropping product B.
Definitions:
Sample Mean
The average value of a set of observations or measurements taken from a sample.
Standard Error
A statistic that measures the variability or spread of sampling distribution means.
Sample Size
The quantity of measurements or repetitions contained within a statistical sample.
Statistical Variation
The measure of how much data values in a statistical set differ from the average or mean value.
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