Question

Brevard Industries produces two products. Information about the products is as follows:

	Product 1				Product 2
Units produced and sold		4,150				10,200
Selling price per unit	$	15			$	13
Variable costs per unit		9				8

The company's fixed costs totaled $72,000, of which $15,200 can be directly traced to Product 1 and $40,200 can be directly traced to Product 2. The effect on the firm's profits if Product 2 is dropped would be a:

$10,800 increase.

$35,800 increase.

$35,800 decrease.

$10,800 decrease.

Answer 1