During the most recent accounting period, Product A provided a contribution margin of $33 000, but after all costs were allocated, the product incurred a net loss of $20 000. Analysis by the business' controller indicates that $22 000 of fixed costs could be avoided if Product A were dropped. By what amount would the business' profit change if Product A is discontinued?

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Quizplus · Accepted Answer

currently contribution margin of $33 000, less fixed costs of $53 000, give a loss of $20000 but if discontinued, contribution margin will be zero, fixed costs of $31 000 will still be incurred, giving a loss of $31 000, which is a decrease to profit of $11 000

During the Most Recent Accounting Period, Product a Provided a Contribution