2. Wilson Company expects the following results, without considering any of the changes described below....
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2. Wilson Company expects the following results, without considering any of the changes described below. Product A Product B Total $100 Sales Variable costs $300 100 $400 140 40 Contribution margin Fixed costs - avoidable - unavoidable $ 60 (20) (50) $200 (30) (100) $260 (50) (150) Profit (loss) $(10) $ 70 $ 60 The unavoidable costs are allocated based on unit sales of 1,000 A and 2,000 B. CONSIDER EACH QUESTION INDEPENDENTLY UNLESS TOLD OTHERWISE. a. Compute Wilson's income if product A is dropped. b. If product A were dropped and the unit sales of product B increased by 30%, what would the company's income be? c. Product A can be dropped and replaced with a new product, C, which would have avoidable fixed costs of $50. Product C would sell for $0.60, have variable costs of $0.20, and expected volume of 400 units. Compute Wilson's income if A were replaced by C. d. Suppose now that products A and B are joint products that are being sold at split-off. All of the costs shown on the income statement are the materials, labor, and overhead of the joint process. Find income if product B were processed further at additional costs of $90 and sold for $350
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