A Company Has Two Different Products That Sell to Separate

question 122

True/False

A company has two different products that sell to separate markets.Financial data are as follows:
$$\begin{array} { | l | r | r | r | } \hline & { \text { Product A } } & \text { Product B } &{ \text { Total } } \\\hline \text { Revenue } & \$ 15,000 & \$ 9,400 & \$ 24,400 \\\hline \text { Variable costs } & ( 8,000 ) & ( 9,500 ) & ( 17,500 ) \\\hline \text { Fixed costs (allocated) } &( 2,000 ) & \underline { ( 2,000 ) } & \underline { ( 4,000 ) } \\\hline \text { Operating income (loss) } & \$ 5,000 & \$ ( 2,100 ) & \$ 2,900 \\\hline\end{array}$$ 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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Definitions:

Court

A tribunal, often a government institution, with the authority to adjudicate legal disputes between parties and carry out the administration of justice in civil, criminal, and administrative matters.

Authority

The authority to command, decide, and ensure compliance.

Non-Corporate Entity

A business structure that is not incorporated, such as partnerships, sole proprietorships, and limited liability companies.

Limited Partnership

A partnership consisting of at least one general partner, who manages the business and is personally liable for debts, and one or more limited partners, who invest but do not manage the business and are not personally liable.