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QUESTION59. Frigidor has two lines of fridges, the results of which are given b...
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QUESTION59. Frigidor has two lines of fridges, the results of which are given below
$
|
A
|
B
|
Total
|
Sales
|
10.000
|
6.000
|
16.000
|
Variable costs
|
6.000
|
5.000
|
11.000
|
Contribution Margin
|
4.000
|
1.000
|
5.000
|
Fixed Costs
|
3.000
|
2.000
|
5.000
|
Profit
|
1.000
|
-1.000
|
0 |
Fixed costs are all indirect (CEO, finance and HR department) and they are allocated to both products with a distribution key. As the fridge (B) seems unprofitable and this leads to zero overall results at the company level, the management is thinking of stopping (B) production. If it does away with the fridge (B), then Frigor can reduce its overall fixed costs by $1,500.
If (B) is stopped, what is the impact on the overall profit?