In the Decision on Whether or Not to Drop an Unprofitable

question 26

Multiple Choice

In the decision on whether or not to drop an unprofitable product line, the product line will most likely be dropped if:

• A) all of the product line's fixed costs are unavoidable.
• B) the product line's total fixed costs are less than the contribution margin lost from dropping the product line.
• C) the contribution margin lost from dropping the product line is less than the fixed costs avoided from dropping the product line.
• D) the contribution margin lost from dropping the product line is more than the fixed costs avoided from dropping the product line.

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Definitions:

State

A political entity that possesses sovereignty, characterized by a defined territory, permanent population, government, and capacity to enter into relations with other states.

Insurable Interest

A stake in an insured property or life that would cause a person to suffer financial loss if the property were damaged or if the insured person were injured or died.

Wagering Contracts

Agreements where the parties stand to win or lose based on the outcome of an uncertain event, often considered unenforceable due to their speculative nature.

Warranty

A guarantee given to the purchaser of an item by the seller, promising repair or replacement in case of defects within a certain period of time.