Asked by
chaoyu Liang
on Nov 12, 2024Verified
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.
Verified Answer
PB
Learning Objectives
- 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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