Problem -
A company has two different products that are sold in different markets. Financial data are as follows:
Product A
Product B
Total
Revenue
$17,000
$9,300
$26,300
Variable cost
(8,000)
(9,800)
(17,800)
Fixed cost (allocated)
(2,000)
(2,200)
(4,200)
Operating income (loss)
$7,000
$(2,700)
$4,300
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?