The decision to drop a product line is based the following factors, except: a. contribution margin...
The decision to drop a product line is based the following factors, except:
| a. |
contribution margin lost is less than fixed costs avoided |
|
| b. |
contribution margin lost is greater than fixed costs avoided |
|
| c. |
decline in sales of the company's other products |
|
| d. |
loss of customers who purchase other products |
In a make-or-buy decision, the relevant costs are typically?
| a. |
costs of buying the product from the outside source |
|
| b. |
variable costs of making the product that can be avoided by buying it |
|
| c. |
any avoidable fixed costs, and opportunity costs incurred by forgoing production of another product |
|
| d. |
all are typically costs |
Homework Answers
| 1 |
| When the contribution margin lost is greater than fixed costs avoided, the product should not be dropped. |
| A product with contribution margin greater than avoidable fixed costs is contribution positively to profit and should not be dropped. |
| Option B is correct |
| 2 |
| In a make-or-buy decision, the relevant costs are variable costs of making the product, buying the product, avoidable fixed costs, and any opportunity costs |
| Option D all are typically costs is correct |
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