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chaoyu Liang
on Nov 12, 2024

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If by dropping a product a firm can avoid more in fixed costs than it loses in contribution margin, then the firm is better off economically if the product is dropped.

Fixed Costs

Expenses that do not change with the level of production or sales activity, such as rent or salaries.

Contribution Margin

This is the amount remaining from sales revenue after all variable expenses have been deducted.

  • Explain and recognize variable and fixed costs along with their significance in making product-related decisions.
  • Comprehend the influence of cost allocations on the profitability of products and business units.
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Peyton BybeeNov 15, 2024
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