A Company Has Two Different Products That Are Sold in Different

question 146

Multiple Choice

A company has two different products that are sold in different markets.Financial data are as follows: $$\begin{array} { | l | r | r | r | } \hline & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Revenue } & \$ 17,000 & \$ 9,500 & \$ 26,500 \\\hline \text { Variable cost } & ( 8,000 ) & ( 9,800 ) & ( 17,800 ) \\\hline \text { Fixed cost (allocated) } & \$ 3,000 ) & \underline { ( 2,200 ) } & \underline { ( 5,200 ) } \\\hline \text { Operating income (loss) } & \$ 6,000 & \$ ( 2,500 ) & \$ 3,500 \\\hline\end{array}$$ Assume that fixed costs of $1,000 could be eliminated if Product B was dropped.Assume furthermore 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 $1,000
• B) increases by $1,300
• C) increases by $300
• D) increases by $2,200

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Definitions:

Unofficial Line

Informal communication channels within an organization that operate alongside the official channels but are not formally recognized.

Communication

The act of conveying information, ideas, feelings, or instructions between people through verbal, non-verbal, written, or digital means.

Grapevines

Informal communication channels within an organization, through which rumors and unofficial information spread.

Sense of Unity

The feeling or perception of being part of a whole, often resulting in a stronger collective identity or purpose.