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:

Declaration Of Independence

The document by which the Thirteen Colonies in North America announced their separation from the British Empire and their intention to form an independent nation in 1776.

Income Inequality

The unequal distribution of household or individual income across the various participants in an economy, which often leads to social and economic disparity.

National Income

The total value of all goods and services produced by a country's economy over a specific period, often used to gauge economic health.

Top 1 Percent

Refers to the wealthiest 1% of the population, often highlighted in discussions of income inequality and economic policy.