lees Corp. is deciding whether to keep or drop a small segment of its business. Key information

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lees Corp. is deciding whether to keep or drop a small segment of its business. Key information regarding the segment includes:

Contribution margin: 35,000

Avoidable fixed costs: 30,000

Unavoidable fixed costs: 25,000


Given the information above, Lees should:
a. Drop the segment because the Contribution margin is less than total fixed costs.

b. Drop the segment because avoidable fixed costs exceed unavoidable fixed costs.

c. Keep the segment because the Contribution margin exceeds avoidable fixed costs.

d. Keep the segment because the Contribution margin exceeds unavoidable fixed costs.

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
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Related Book For  answer-question

Horngrens Cost Accounting A Managerial Emphasis

ISBN: 978-0134453736

8th Canadian Edition

Authors: Srikant M. Datar, Madhav V. Rajan, Louis Beaubien

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