The key to evaluating the profit effects of a business' decision to drop a product is to determine the avoidable costs and the revenues that it would not earn if it discontinued production and sale of the product.

Question

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Evaluating the profit effects of discontinuing a product involves analyzing the costs that would be saved (avoidable costs) and the revenues that would be lost as a result of the decision, to understand the net impact on the business's profitability.

The Key to Evaluating the Profit Effects of a Business