Homework Answers
If the Company Drops Product Profit will reduce by $ 1000
Explanation and calculations
Change in Operating income = Saving in avoidable cost for product C - Loss of contribution margin of product C
= 3000 - 4000
= - $ 1000
This means operating income will decrease by $ 1000
Note
Unavoidable fixed cost are sunk cost and does not gets affected,
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