Question

8 pt The following income statement is for X Company and its only two products - A and B Product A Total Product B $94,000 54,520 $39,480 $179,170 97,957 $81,213 $85,170 Sales Variable Costs Contribution margin Fixed costs: Avoidable Unavoidable 43,437 $41,733 48,180 30,790 82,243 20,260 27,920 25,180 S-11,367 5,610 $13,610 Profit Because Product B is showing a loss, X Company is considering dropping it and saving its avoidable fixed costs. If it drops Product B, X Company's new profits will be FO S14,462 EO $-11,570 DO 8-9,256 CO $-7,405 BO S-5,924 AO S-4,739 8.

Answer 1

If product B is dropped, income statement will appear as under:

Sales	94,000
Variable costs	- 54,520
Contribution margin	39,480
Fixed costs:
Avoidable	- 20,260
Unavoidable	- 30,790
Profit	- $11,570

Correct option is (E)

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