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Oduvanchick
2 months ago
8

A company currently has two product lines and is considering dropping

Business
1 answer:
Nady [3.6K]2 months ago
4 0
Product XYZ should remain as it brings in a contribution of $5,000 towards covering fixed costs. The profit contribution for Product XYZ can be calculated as follows: Sales revenue = $60,000, subtracting Cost of Goods Sold = ($40,000). The resulting Contribution Margin stands at $20,000. After accounting for Traceable Fixed Costs of ($30,000 - $15,000), which equals ($15,000), the Profit Contribution ends up being $5,000. As a reminder, the fixed cost element overseen from Product XYZ should be excluded. Given that Product XYZ contributes $5,000 towards fixed costs, it should not be discontinued.
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