It may be that a product makes a loss after overhead costs have been absorbed into the product. This does not mean the product should be dropped.

Question

Quizplus · Accepted Answer

It is possible that a product may have a negative contribution margin (revenue minus variable costs) but when overhead costs are allocated, the product may still show a profit. Even if the product shows a loss after overhead costs, it may still be worthwhile to continue selling the product if it attracts customers to the company or if it is necessary to complement other profitable products in the product mix.

It May Be That a Product Makes a Loss After