Company A provides you with the following information for its unique products X and Y. In total A has sold 8,000 units.

 

	X	Y
Turnover	140 000$	400 000$
Costs of goods sold	108 000	258 000
Gross margin	32 000	142 000
Miscellaneous costs	36 000	79 500
Result	(4 000$)	62 500$

The fixed indirect manufacturing costs per unit included in the cost of goods sold of A and the company are $8 and $6, respectively. The unit variable miscellaneous costs are $5 for X and $21 for Y. The other miscellaneous costs are fixed. Y's units sold are 2,000.

A wishes to eliminate X. In such a situation the fixed manufacturing costs and the fixed miscellaneous costs remain unchanged. What will be the effect on A's net profit?

Answer rating: 100% (QA)

Answer Impact of Eliminating Product X on Net Profit Lets analyze the cost changes and calculate the ... View the full answer