Problem - The following information is for X Company's two products, A and B, last year:
|
|
Product A
|
Product B
|
|
Sales
|
$92,860
|
$85,700
|
|
Total variable costs
|
55,716
|
46,278
|
|
Total fixed costs
|
29,670
|
72,730
|
|
Profit
|
$7,474
|
$-33,308
|
Because of the reported loss for Product B, X Company is considering dropping lt. Further analysis reveals that $1980 of Product A's fixed costs and $27,340 of Product B's fixed costs are common costs that the company allocates to the two products.
If Company drops Product B, company profits will change by?
Assume that sales of Product A can be increased by $15,680 lf Product B is dropped. What will he the effect of this increase on company profits?