“My boss simply doesn’t get it. We are operating at 60% of capacity, and this situation is not likely to improve for at least six months. I just convinced a regular client to double her order. But, I had to cut the price below cost to get the order. Even with the price cut, we are making a good contribution. Therefore, this is a good deal. But the VP has nixed the deal insisting that all orders must cover full costs, including allocated fixed costs.” This is Brian Baxter’s rant, after learning that his latest deal has fallen through.
Brian is a star salesman for an equipment manufacturing company that is subject to a six-year business cycle. That is, the firm usually experiences three years of high demand followed by three years of low demand. The firm is currently on the down cycle. An upswing is expected in 6 to 12-months.

Required:
a. How could Brian justify taking an order that generates positive contribution margin but a negative profit margin?
b. What arguments could the VP for sales advance to justify her decision to nix the sale?