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Technical ProDucTion
on Nov 13, 2024

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A company is considering eliminating a product line. The fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance. If the product line is discontinued

A) total net income will increase by the amount of the product line's fixed costs.
B) total net income will decrease by the amount of the product line's fixed costs.
C) the contribution margin of the product line will indicate the net income increase or decrease.
D) the company's total fixed costs will decrease.

Product Line

A series of related products offered by a company that serve similar functions or are targeted at a similar customer base.

Fixed Costs

Expenses that do not change with changes in the volume of production or sales, such as rent or salaries.

Contribution Margin

The difference between the sales revenue of a product and its variable costs, indicating how much contributes to covering fixed costs and generating profit.

  • Evaluate the financial consequences of ceasing a product line.
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LA
Leyla AvagyanNov 13, 2024
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