Management of Bluebird Manufacturing Is Considering Whether to Drop a Product

question 24

Essay

Management of Bluebird Manufacturing is considering whether to drop a product line.So far,management has determined that the product has a negative contribution margin and that lost revenues are less than the total cost savings.In making the final decision,what are other questions that the management of Bluebird should consider?

---

Definitions:

Indirect Materials

Materials used in the production process but not directly traceable to a finished product, such as lubricants for machinery.

Spending Variance

The difference between the budgeted or planned amount of expense and the actual amount spent.

Standard Costing System

A cost accounting system that assigns expected costs to products to help managers monitor and control actual costs.

Direct Materials

Raw materials that can be directly traced to the production of a specific product.