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:
$$\begin{array} { | l | l | l | l | } \hline & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Revenue } & \$ 18,000 & \$ 9500 & \$ 27,500 \\\hline \text { Variable cost } & ( 9000 ) & ( 9700 ) & ( 18,700 ) \\\hline \text { Fixed cost (allocated) } & \$ 2000 ) & \$ 2000 ) & ( 4000 ) \\\hline \text { Operating profit } & \$ 7000 & ( \$ 2200 ) & \$ 4800 \\\hline\end{array}$$
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 profit of the company?

• A) decrease $2000
• B) increase $2000
• C) decrease $200
• D) increase $200

---

Definitions:

Poverty

A socio-economic condition characterized by a lack of access to essential resources, services, and opportunities necessary for a minimum standard of living.

Capital Accumulation

The process of acquiring and investing capital in order to increase the wealth or productive capacity of an economy.

Saving

The act of setting aside money for future use, rather than spending it immediately, typically to achieve a financial goal or prepare for emergencies.

Domestic Output

The total value of all goods and services produced within a country's borders within a given time period.