When Will the Elimination of a Product Line Have No

question 87

Multiple Choice

When will the elimination of a product line have no effect on the company's overall profit?

• A) When the avoidable fixed costs equal the product line's contribution margin
• B) When the unavoidable fixed costs equal the product line's contribution margin
• C) When there are no fixed costs incurred by the product line
• D) When the product line contribution margin is negative

---

Definitions:

Fixed Manufacturing Overhead

Costs related to manufacturing that do not change with the level of production, such as factory rent and salaries of supervisory personnel.

Budget Variances

The differences between budgeted amounts and actual amounts.

Machine-Hours

An allocation base in cost accounting used to assign costs to products or services, based on the hours of machine operation required.

Fixed Manufacturing Overhead

Consists of manufacturing costs that do not change with the level of production, such as salaries of supervisors and rent for factory premises.