Brevard Industries Produces Two Products The Company's Fixed Costs Totaled $70,000, of Which $15,000 Can

Multiple Choice

Brevard Industries produces two products. Information about the products is as follows:
$\begin{array}{lrr}&\text { Product } 1&\text { Product } 2\\ \text { Units produced and sold } &4,000&10,000\\ \text {Selling price per unit } &\$15&\$13\\ \text { Variable costs per unit } &9&8\\\end{array}$

The company's fixed costs totaled $70,000, of which $15,000 can be directly traced to Product 1 and $40,000 can be directly traced to Product 2. The effect on the firm's profits if Product 2 is dropped would be a:

A) $10,000 increase.
B) $35,000 increase.
C) $35,000 decrease.
D) $10,000 decrease.