A segment or department that has a negative contribution margin is often in jeopardy of being closed.

Question

Quizplus · Accepted Answer

A negative contribution margin means that the segment or department is not generating enough revenue to cover its variable costs. If this is the case, the segment is not contributing to the company's overall profitability and may need to be closed or restructured to improve its financial performance.

A Segment or Department That Has a Negative Contribution Margin