Eliminating One Department May Increase the Sales of Another Department

question 3

True/False

Eliminating one department may increase the sales of another department.

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Definitions:

Production Planning

The process of forecasting, planning, and controlling the quantity, timing, and quality of production activities.

Absorption Costing

A method of accounting that incorporates all costs associated with manufacturing (such as direct materials, direct labor, and all overhead expenses, whether fixed or variable) into the product's cost.

EBITDA

Earnings Before Interest, Taxes, Depreciation, and Amortization, a measure used to evaluate a company's profitability without the effects of financing and accounting decisions.

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted, indicating how much revenue contributes to fixed expenses and profit.