A Company Has Two Different Products That Are Sold in Different

question 56

Multiple Choice

A company has two different products that are sold in different markets.Financial data are as follows: $$\begin{array} { | l | r | r | r | } \hline & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Revenue } & \$ 18,000 & \$ 9400 & \$ 27,400 \\\hline \text { Variable cost } & ( 8000 ) & ( 9800 ) & ( 17,800 ) \\\hline \text { Fixed cost (allocated) } & \underline { ( 1000 ) } & \underline { ( 2000 ) } & \underline { ( 3000 ) } \\\hline \text { Operating income (loss) } & \$ 9000 & \$ ( 2400 ) & \$ 6600 \\\hline\end{array}$$ Assume that fixed costs of $1000 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 $1000
• B) increases by $1400
• C) increases by $400
• D) increases by $2000

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Definitions:

Median Cubital Vein

A superficial vein of the upper limb, often used for venipuncture (drawing blood), located at the front of the elbow.

Suprarenal Vein

A vein draining blood from the adrenal gland into the renal vein or inferior vena cava.

Internal Jugular Vein

A major vein that collects blood from the brain, face, and neck, and returns it to the heart.