Products Should Be Dropped When Its Total Contribution Margin Does

question 59

True/False

Products should be dropped when its total contribution margin does not cover avoidable fixed costs.

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Definitions:

Labor Rate Variance

A measure used in managerial accounting to assess the difference between the actual wage rates paid to workers and the expected standard wage rates for a period.

Standard Direct Labor

The expected amount of labor time and cost necessary to produce one unit of product under normal conditions.

Power Cost

The expense incurred by a company for the electricity used in its operations.

Automotive Engines

The specific units within vehicles that convert fuel into mechanical power, allowing the vehicle to move.