A Product Line Should NOT Be Discontinued If the Contribution

question 173

Multiple Choice

A product line should NOT be discontinued if the contribution margin lost is

• A)more than the fixed costs saved.
• B)less than the fixed costs saved.
• C)more than the variable costs saved.
• D)less than the variable costs saved.

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Definitions:

Finished Goods Inventory

Items that have completed the manufacturing process and are ready to be sold to customers.

Specialized Electrical Switches

Electrical switches designed for specific functions or applications, often requiring custom designs or specifications to meet unique operational or safety standards.

Variable Costing

A pricing approach that incorporates solely the variable costs of production—such as direct materials, direct labor, and variable manufacturing overhead—into the cost per unit of products.

Variable Production Costs

Costs that vary directly with the level of production, such as raw materials and direct labor.