1. Wedgewood Ltd. sells two products, Alpha and Beta. The company is considering dropping product Beta. It is expected that sales of Alpha will increase by 40% as a result. Dropping Beta will allow the company to cancel its monthly equipment rental costing $100 per month. The other existing equipment will be used for additional production of Alpha. One employee earning $200 per month can be terminated if Beta production is dropped. Clinton's other fixed costs are allocated and will continue regardless of the decision made. Currently Alpha has sales of $10,000, allocated overhead of $1,000, equipment rental is $300 and operating income of $4,200. Beta has sales of $8,000, allocated overhead of $2,100, equipment rental is $2,600 and operating income of $100. All other costs are variable.
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3. What is the total financial effect of dropping the Beta product?

Answer rating: 100% (QA)

To determine the total financial effect of dropping the Beta product we need to consider the changes ... View the full answer