A Company Has Two Different Products That Sell to Separate

question 28

True/False

A company has two different products that sell to separate markets. Financial data are as follows:
$\begin{array}{|l|r|r|r|} \hline &{\text { Product A }} &{\text { Product B }} &{\text { Total }} \\\hline \text { Revenue } & \$ 15,000 & \$ 9,000 & \$ 24,000 \\\hline \text { Variable cost } & (8,000) & (9,200) & (17,200) \\\hline \text { Fixed cost (allocated) } & (4,000) & (1,000) &(5,000)\\\hline \text { Operating income } & \$ 3,000 & \$(1,200)&\$1,800 \\\hline\end{array}$ Assume that fixed costs are all unavoidable and that dropping one product would not impact sales of the other. Because the contribution margin of Product B is negative, it should be dropped.

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