A Particular Product Line Is Most Likely to Be Dropped

question 51

Multiple Choice

A particular product line is most likely to be dropped when:

• A) its total fixed costs are more than its contribution margin.
• B) its avoidable fixed costs are more than its contribution margin.
• C) its unavoidable fixed costs are more than its contribution margin.
• D) its variable costs are more than its fixed costs.

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Definitions:

Profit

The financial gain obtained when the revenue generated from business activities exceeds the expenses, costs, and taxes involved in sustaining the activity.

Objective Function

A mathematical function used in decision-making, optimization, or problem-solving that specifies the objective to be maximized or minimized.

Maximize Contribution

A financial strategy or goal to increase the difference between total sales and total variable costs to maximize the profit contributed towards fixed costs and earnings.

Unbounded Maximizing

A type of optimization problem where the goal is to find the highest possible value of an objective function without upper limits.