Question

Dropping a product line will improve overall net operating income if the product line avoidable costs...

Dropping a product line will improve overall net operating income if the product line avoidable costs exceeds

A the contribution margin from the product line

B the unavoidable costs from the product line

C the opportunity costs from the product line

D the sunk costs from the product line

Business   Accounting   
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Homework Answers

Answer #1

Answer: A the contribution margin from the product line

Explanation:

1.If the product line avoidable costs are exceeds the contribution from the product line then,

Dropping a product line will improve overall net operating income.

2. If the product line unavoidable costs are exceeds the contribution from the product line then,

Dropping a product line will decrease overall net operating income.

3.Opportunity cost & Sunk cost do not consider for product dropping decisions.

Thus,

Dropping a product line will improve overall net operating income if the product line avoidable costs exceeds

A the contribution margin from the product line.

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