Keep or drop a business segment. 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.
Keep or drop a business segment. 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.
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 14EB: Company A has current sales of $4,000,000 and a 45% contribution margin. Its fixed costs are...
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Keep or drop a business segment. 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.
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