A Company Has Two Different Products That Are Sold in Different

question 117

Multiple Choice

A company has two different products that are sold in different markets.Financial data are as follows:
$$\begin{array} { | l | l | l | l | } \hline & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Revenue } & \$ 15,000 & \$ 9300 & \$ 24,300 \\\hline \text { Variable cost } & ( 7000 ) & ( 9800 ) & ( 16,800 ) \\\hline \text { Fixed cost (allocated) } & \$ 2000 ) & \$ 2100 ) & ( 4100 ) \\\hline \text { Operating income } & \$ 6000 & ( \$ 2600 ) & \$ 3400 \\\hline\end{array}$$
Assume that fixed costs of $2000 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 profit of the company?

• A) increase $500
• B) increase $2000
• C) increase $2500
• D) increase $2100

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Definitions:

Brake Fluid

A type of hydraulic fluid used in brake systems to transfer force into pressure, enabling braking.

Power Boosters

Power boosters amplify the force applied to a system, such as in braking systems where they assist in applying greater force to the brake pedal with less physical effort.

Hydraulic Boosters

Devices that use hydraulic pressure to amplify or boost the force applied, commonly used in brake systems.