A Company Has Two Different Products That Are Sold in Different

question 86

Multiple Choice

A company has two different products that are sold in different markets. Financial data are as follows: $$\begin{array} { | l | r | r | r | } \hline & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Revenue } & \$ 17,000 & \$ 9300 & \$ 26,300 \\\hline \text { Variable cost } & ( 8000 ) & ( 9800 ) & ( 17,800 ) \\\hline \text { Fixed cost (allocated) } & \underline { ( 1000 ) } & \underline { ( 2100 ) } & \underline { ( 3100 ) } \\\hline \text { Operating income (loss) } & \$ 8000 & \$ ( 2600 ) & \$ 5400 \\\hline\end{array}$$ Assume that fixed costs of $2000 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) increases by $2000
• B) increases by $2500
• C) increases by $500
• D) increases by $2100

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Definitions:

US Workers

Individuals employed within the United States, encompassing a wide range of occupations and industries.

Exports

Goods or services sent from one country to another for sale or trade, contributing to a nation’s gross domestic product.

Imports

Items and services that are purchased from foreign nations to be sold within the country.

Produced Abroad

Refers to goods or services that are created or performed outside the borders of the home country, often considered in the context of imports and exports.