The following information is for X Company's two products, A and B, last year:     Product A Product B Sales $87,870 $92,940 Total variable costs 45,692 55,764 Total fixed costs 61,770 30,280 Profit $-19,592 $6,896 Because of the reported loss for Product A, X Company is considering dropping it. Further analysis reveals that $28,940 of Product A's fixed costs and $6,300 of Product B's fixed costs are common costs that the company allocates to the two products. 1. If X Company drops Product A, company profits will change by __________. 2. Assume that sales of Product B can be increased by $18,690 if Product A is dropped. What will be the effect of this increase on company profits?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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The following information is for X Company's two products, A and B, last year:

 

  Product A Product B
Sales $87,870 $92,940
Total variable costs 45,692 55,764
Total fixed costs 61,770 30,280
Profit $-19,592 $6,896

Because of the reported loss for Product A, X Company is considering dropping it. Further analysis reveals that $28,940 of Product A's fixed costs and $6,300 of Product B's fixed costs are common costs that the company allocates to the two products.

1. If X Company drops Product A, company profits will change by __________.

2. Assume that sales of Product B can be increased by $18,690 if Product A is dropped. What will be the effect of this increase on company profits?

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