Question

When making a product line decision, a company may focus on lost _______ ______ and avoidable fixed costs or prepare comparative income statements. Group of answer choices contribution margin target pricing extraction processing none of the above

Answer 1

contribution margin

Step-by-step explanation:

Contribution margin is the portion of amount by which selling price per unit exceeds variable cost per unit. The amount is the portion of selling price used to service annual fixed cost and profit.

When making a product line decision, it is important for companies to focus on contribution margin of the product that yield the highest profit. Also avoidable fixed cost should be focused on by the firm.

If a firm intends to discontinue certain line of business, all avoidable fixed cost such as cost associated with the product to be discontinued will be avoided.