A company has two different products that sell to separate markets
Financial data are as follows:
Product A Product B Total
Revenue $15,000 $9,000 $24,000
Variable costs (8,000 ) (9,200 ) (17,200 )
Fixed costs (allocated) (2,000 ) (1,000 ) (3,000 )
Operating income (loss) $5,000 $(1,200 ) $3,800
Assume that fixed costs are all unavoidable and that dropping one product would not impact sales of the other. Because the contribution margin of Product B is negative, it should be dropped.
Indicate whether the statement is true or false
TRUE
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