A company has two different products that are sold in different markets
Financial data are as follows:
Product A Product B Total
Revenue $16,000 $9,400 $25,400
Variable cost (9,000 ) (9,900 ) (18,900 )
Fixed cost (allocated) (3,000 ) (2,100 ) (5,100 )
Operating income (loss) $4,000 $(2,600 ) $1,400
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) increases by $2,100
B) increases by $500
C) decreases by $2,100
D) decreases by $500
B .B)
Expected decrease in revenue $9,400
Expected decrease in variable costs 9,900
Expected increase in operating income $500
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