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ABC Company sells three products. Income statements for the three...

ABC Company sells three products. Income statements for the three products for the mostrecent year appear below:
                                            Product A          Product B          Product C
Sales revenue  ......................        $120,000           $180,000          $145,000
Costs:     Variable costs .................          78,000             54,000            87,000
     Advertising ....................          10,000              7,000             8,000     Rent ...........................          10,000             10,000            10,000     Supervisor's salary ............          25,000             35,000            30,000     Property taxes .................          12,000              6,000             2,000
Net income/loss .....................         <15,000>            68,000             8,000The rent is allocated to the three products equally and the property taxes are allocatedbased on the square footage each product uses in the factory.The president of the company is considering eliminating Product A. As an alternative todropping Product A, the president is considering increasing the advertising of Product A.The cost of the additional advertising will be $26,000 and the additional advertising isexpected to increase the sales of Product A.Assume that if Product A is dropped the sales of Product B will increase by $8,000and the sales of Product C will increase by $5,000.Calculate the amount of sales revenue generated by Product A that would make ABCCompany economically indifferent between dropping Product A and increasing theadvertising of Product A (and thus continuing to sell Product A). Do not usedecimals in your answer.

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Product A.xls
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