A Company Has Two Different Products That Are Sold in Different

question 4

Multiple Choice

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

Forearm

The part of the arm between the elbow and the wrist.

Supination

The rotational movement of the forearm or foot that results in the palm or sole facing upwards or forwards.

Pronation

The rotation of the hand or forearm so that the palm faces downwards or backwards, or the inward roll of the foot during normal motion.

Depression

A mental health disorder characterized by persistently depressed mood or loss of interest in activities, causing significant impairment in daily life.