A Company Manufactures Three Products as Shown Below The Company Should:
A)continue Producing C Because It Has a a Decision
A company manufactures three products as shown below.It is considering a decision to discontinue the production of product C.Corporate overhead of $60,000 is allocated to each product in equal parts.If the company decides to discontinue product C,50% of its quantity demanded will shift to product A (i.e.,products A and C are substitutes) .Product B is neither a substitute nor a complement for product A or product C. The company should:
A) continue producing C because it has a positive unit margin.
B) continue producing C because the substitution effect does not compensate for the loss of profit contribution from product C.
C) discontinue producing C because this decision maximizes the total economic profit contribution generated by the company.
D) discontinue both B and C since neither has a positive contribution to economic profit.
Correct Answer:
Verified
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