Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with retirement income of $17,500 per month for 25 years, with the first payment received 30 years and 1 month from now. Second, he would like to purchase a cabin in Rivendell in 10 years at an estimated cost of $345,000. Third, after he passes on at the end of the 25 years of withdrawals, he would like to leave an inheritance of $2,000,000 to his nephew Frodo. He can afford to save $2,350 per month for the next 10 years. If he can earn an EAR of 10 percent before he retires and an EAR of 7 percent after he retires, how much will he have to save each month in Years 11 through 30

New Profit excluding product 2=-$18,000 (-ve sign shows decrease in profit)

Actually company profit was decreased by $18,000  by excluding product 2

Explanation:

                                         Product 1                                          Product 2

Units                                      5,950                                             12,000

Selling Price per unit            $16                                                 $14

Variable cost per unit           $10                                                 $9

Fixed Cost                             $17,000                                          $42,000

Profit on units                       ($16-$10)=$6                           ($14-$9)=$5

Current Profit Including both products:

Current Profit=[(5950*6)+(12000*5)]-90000

Current Profit=$5,700

Profit of only Product 1:

Profit=(5950*6)-(90000-42000)=-$12,300

New Profit excluding product 2= Profit of only Product 1 - Current Profit

New Profit excluding product 2=-12,300-$5,700

New Profit excluding product 2=-$18,000 (-ve sign shows decrease in profit)

Actually company profit was decreased by $18,000  by excluding product 2