On which of the following factors should the decision to drop a product line should be based?
A)the fact that the product line shows a net loss over several periods.
B)the ability of the firm to eliminate some fixed costs as a result of dropping the product.
C)whether the fixed costs that can be avoided by dropping the product line are less than the contribution margin that will be lost.
D)whether the fixed costs that can be avoided by dropping the product line are greater than the contribution margin lost.

Question

Quizplus · Accepted Answer

The decision should be based on whether the fixed costs that can be avoided by dropping the product line are greater than the contribution margin lost, as this would result in a net financial benefit to the firm.

On Which of the Following Factors Should the Decision to Drop