All of the Following Are Considerations for Discontinuing a Product

question 27

Multiple Choice

All of the following are considerations for discontinuing a product or product line, except

• A)whether the product has a positive or negative contribution margin.
• B)not having any free capacity.
• C)if discontinuing the product or product line will affect sales of remaining products.
• D)determining if direct fixed costs could be avoided if the product or product line is discontinued.

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Definitions:

Operating Activities

These involve the primary, day-to-day tasks of producing goods, providing services, and selling products, capturing the cash flows from these central business operations.

Indirect Method

A cash flow statement preparation approach that adjusts net income for non-cash transactions and changes in working capital to calculate cash flow from operating activities.

Book Value

The net value of a company's assets minus its liabilities, or the net value recorded on the financial statements.

Statement of Cash Flows

An accounting statement illustrating how fluctuations in income and balance sheet accounts influence cash and cash equivalents.