The variable costing concept removes fixed costs, which are uncontrollable, from the decision-making process (see variable costing income statement). This forces management to focus on the variable factors of production, sales revenue and variable costs. I remember learning this concept in economics at LBCC, where a company should shut down if a products price falls below variable cost and just incur fixed costs.

Have you ever heard the saying The company loses $1.00 on every unit sold, but we are confident the losses can be made up on volume. Really?

In theory, companies should not operate with a negative contribution margin (sales revenue-variable costs), but my guess is that some do especially in this economic environment?

Do you think companies actually operate (or produce products) with a negative contribution margin?