Managers Who Utilize Customer Profitability Charts Should Drop Customers That

question 129

True/False

Managers who utilize customer profitability charts should drop customers that generate a negative customer operating income, since dropping an unprofitable customer will automatically cause overall income to increase.

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Definitions:

Margin of Safety

This metric calculates how much sales can decline before a business reaches its breakeven point.

Total Contribution Margin

The total amount remaining from sales revenue after all variable costs are deducted, used to cover fixed costs and profit.

Margin of Safety

The difference between actual sales and the break-even point, indicating the amount by which sales can drop before the business incurs a loss.

Capital Intensive

A business process or industry that requires large amounts of money and financial resources to produce a good or service.