A company has two different products that are sold in different markets. Financial data are as follows: $$\begin{array} { | l | r | r | r | }
\hline & \text { Product A } & \text { Product B } & { \text { Total } } \
\hline \text { Revenue } & \$ 15,000 & \$ 9,500 & \$ 24,500 \
\hline \text { Variable cost } & ( 9,000 ) & ( 9,800 ) & ( 18,800 ) \
\hline \text { Fixed cost (allocated) } & ( 3,000 ) & ( 2,000 ) & ( 5,000 ) \
\hline \text { Operating income } & \$ 3,000 & ( \$ 2,300 ) & \$ 700 \
\hline
\end{array}$$ 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 income of the company?

Question

A company has two different products that are sold in different markets. Financial data are as follows: $$\begin{array} { | l | r | r | r | } 
\hline & \text { Product A } & \text { Product B } &  { \text { Total } } \
\hline \text { Revenue } & \$ 15,000 & \$ 9,500 & \$ 24,500 \
\hline \text { Variable cost } & ( 9,000 ) & ( 9,800 ) & ( 18,800 ) \
\hline \text { Fixed cost (allocated) } & ( 3,000 ) & ( 2,000 ) & ( 5,000 ) \
\hline \text { Operating income } & \$ 3,000 & ( \$ 2,300 ) & \$ 700 \
\hline
\end{array}$$ 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 income of the company?

Quizplus · Accepted Answer

The Answer of A company has two different products that are sold in different markets. Financial data are as follows: $$\begin{array} { | l | r | r | r | } 
\hline & \text { Product A } & \text { Product B } &  { \text { Total } } \
\hline \text { Revenue } & \$ 15,000 & \$ 9,500 & \$ 24,500 \
\hline \text { Variable cost } & ( 9,000 ) & ( 9,800 ) & ( 18,800 ) \
\hline \text { Fixed cost (allocated) } & ( 3,000 ) & ( 2,000 ) & ( 5,000 ) \
\hline \text { Operating income } & \$ 3,000 & ( \$ 2,300 ) & \$ 700 \
\hline
\end{array}$$ 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 income of the company?

A Company Has Two Different Products That Are Sold in Different