The following are the budgeted profit functions for X Company’stwo products, A and B, next year:
Product A: P = .45 (R) – $58,720
Product B: P = .42 (R) – $26,420
where R is revenue. Budgeted revenue for the two products are$86,000 and $93,000, respectively. Unavoidable fixed costs for thetwo products are $21,726 and $11,889, respectively. The company isconsidering dropping Product A; if it does, the resulting freed-upresources can be used to increase revenue from sales of Product Bby $18,300, with no additional fixed costs.
1. If X Company drops A and increases revenue from B, firmprofits will change by________
Expert Answer
An
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