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