A Company Has Two Different Products That Are Sold in Different

question 85

Multiple Choice

A company has two different products that are sold in different markets.Financial data are as follows: $$\begin{array} { | l | r | r | r | } \hline & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Revenue } & \$ 17,000 & \$ 9,400 & \$ 26,400 \\\hline \text { Variable cost } & ( 8,000 ) & ( 9,700 ) & ( 17,700 ) \\\hline \text { Fixed cost (allocated) } & \underline { ( 1,000 ) } & \underline { ( 2,000 } & \underline { ( 3,000 ) } \\\hline \text { Operating income (loss) } & \$ 8,000 & \$ ( 2,300 ) & \$ 5,700 \\\hline\end{array}$$ 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 $2,000
• B) increases by $300
• C) decreases by $2,000
• D) decreases by $300

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