Suppose a fiRm Calculates Its EFN and fiNds That It

question 8

Essay

Suppose a firm calculates its EFN and finds that it is negative. What are the firm's options in this
case?

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Definitions:

Contribution Margin

The amount by which a product's sales revenue exceeds its variable costs, contributing towards covering fixed costs and generating profit.

Gross Margin

The difference between sales revenue and the cost of goods sold, representing the core profitability of a company's products.

Variable Cost

Costs that vary directly with the level of production or business activity, including expenses such as raw materials and labor.

Machine Hours

The total operating time of machinery used in the production process during a specific period.