Which of the Following Are Valid Reasons for Eliminating a Product

question 46

Multiple Choice

Which of the following are valid reasons for eliminating a product line?
I.The product line's contribution margin is negative.
II.The product line's traceable fixed costs plus its allocated common corporate costs are less than its contribution margin.

• A)Only I
• B)Only II
• C)Both I and II
• D)Neither I nor II

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Definitions:

Risk-Free Rate

The theoretical return on an investment with zero risk, typically represented by the yield on government securities.

Expected Rate

The rate of return that an investor anticipates earning on an investment without taking into account inflation or other factors that could affect the actual yield.

Liquidity Spreads

The difference in yield or cost between liquid (easily convertible to cash) assets and illiquid assets, often indicative of the liquidity premium required by investors.

Security A

A generic term used to represent a particular stock or financial instrument in theoretical examples.