The following information is for X Company's two products - A and B:
| Product A |
Product B |
| Total contribution margin |
$35,600 |
$39,060 |
| Contribution margin rate |
40% |
42% |
| Fixed costs |
$56,110 |
$31,510 |
| Profit |
$-20,510 |
$7,550 |
10% of Product A's fixed costs are allocated; 10% of Product B's fixed costs are allocated. The unallocated fixed costs are directly related to the individual products.
The company is considering dropping Product A because of the $20,510 loss. If X Company drops A, it will use the freed-up resources to increase sales of Product B by $15,000, but there will be additional fixed costs of $2,400. If X Company drops A, firm profits will change