If a segment of a business is expected to produce an annual contribution margin of $30,000 but is also expected to incur controllable fixed costs of about $40,000 annually, that segment should probably be discontinued.

Question

Quizplus · Accepted Answer

The segment is expected to incur controllable fixed costs that are greater than the expected contribution margin, resulting in a loss of $10,000 annually. Therefore, it is not financially viable to continue this segment and it should be discontinued.

If a Segment of a Business Is Expected to Produce