A Company Has Two Different Products That Are Sold in Different

question 144

Multiple Choice

A company has two different products that are sold in different markets.Financial data are as follows: $$\begin{array} { | l | r | r | r | } \hline & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Revenue } & \$ 16,000 & \$ 9,400 & \$ 25,400 \\\hline \text { Variable cost } & ( 9,000 ) & ( 9,900 ) & ( 18,900 ) \\\hline \text { Fixed cost (allocated) } & \$ 3,000 ) & \underline { ( 2,100 ) } & \underline { ( 5,100 ) } \\\hline \text { Operating income (loss) } & \$ 4,000 & \$ ( 2,600 ) & \$ 1,400 \\\hline\end{array}$$ 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 $2,100
• B)increases by $500
• C)decreases by $2,100
• D)decreases by $500

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