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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Identifies differences or unique characteristics that set someone or something apart from others.

Meaningful Difference

A significant and relevant variation between groups or measurements that is not due to chance.