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blsea [12.9K]
3 years ago
8

Giant Company has three products, A, B, and C. The following information is available:

Business
1 answer:
myrzilka [38]3 years ago
7 0

Answer:

$24,000

Explanation:

                             Product A      Product B     Product C

sales                        70,000            97000

Variable  cost           37000            51000

Contribution margin 33000            46000

Avoidable cost          10,000           20000

Unavoidable cost       7000             12000         9400

Operating income      16000            14000

Total operating income if product C is dropped is (16000+14000 +3400-9400)

=$24000

Please note that Giant company with still incur the unavoidable cost even if the product is dropped. This is assumed to be a portion of the fixed overhead expenses allocated to the product in the course of normal operation.However , the loss made of 3400 will be avoided as well

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