Question

In: Accounting

ABC Company sells three products. Income statements for the three products for the most recent year...

ABC Company sells three products. Income statements for the three products
for the most recent year appear below:

                                   Product A       Product B       Product C
Sales revenue  ................     $120,000        $180,000       $145,000
Costs:
     Variable costs ...........       78,000          54,000         87,000
     Advertising ..............       12,000           7,000          8,000
     Rent .....................       10,000          10,000         10,000
     Supervisor's salary ......       25,000          35,000         30,000
     Property taxes ...........       10,000           6,000          2,000
Net income/loss ...............      <15,000>         68,000          8,000

The rent is allocated to the three products equally and the property taxes
are allocated based on the square footage each product uses in the factory.

The president of the company is considering eliminating Product A.  If ABC
Company eliminates Product A, sales of Product B are expected to increase
by $10,000.

Calculate the increase in company profits if Product A is dropped.

Solutions

Expert Solution

Increase in Profit after Product A dropped 66000-61000 $ 5,000

ekkarill92 answered 2 years ago
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