| Product A | Product B | Total |
Sales | $10,000 | $ 8,000 | $18,000 |
Direct materials | 2,500 | 2,000 | 4,500 |
Direct labor | 2,000 | 1,200 | 3,200 |
Equipment rental | 300 | 2,600 | 2,900 |
Other allocated overhead | 1,000 | 2,100 | 3,100 |
Operating income | $4,200 | $ 100 | $ 4,300 |
Product A increase in sales $10,000 × 40% | $4,000 |
Product B decrease in sales | (8,000) |
Incremental decrease in revenue | ($4,000) |
Direct materials: Product A increase $2,500 × 40% | (1,000) |
Product B decrease | 2,000 |
Direct labor: Product A increase $2,000 × 40% | (800) |
Product B decrease | 500 |
Incremental decrease in variable costs | 700 |
Equipment rental deduction | 200 |
Incremental decrease in profits if product B is dropped | ($3,100) |