A particular product line is most likely to be dropped when:

Question

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When a product line's avoidable fixed costs (costs that can be eliminated if the product line is discontinued) are more than its contribution margin (revenue minus variable costs), it is most likely to be dropped as it is no longer profitable. This decision can be made using the avoidability concept of cost behavior analysis. Option A is incorrect because total fixed costs do not take into account the avoidable and unavoidable components. Option C is incorrect because unavoidable fixed costs cannot be eliminated even if the product line is discontinued. Option D is also incorrect because variable costs do not provide the relevant information needed to make this decision.

A Particular Product Line Is Most Likely to Be Dropped