The contribution margin approach helps managers in short-term decision making because it ________.

Question

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The contribution margin approach isolates costs by behavior, meaning it separates variable costs from fixed costs. This helps managers make short-term decisions by allowing them to focus on the costs that directly relate to the production or sale of a product or service. By understanding the contribution margin (revenue minus variable costs) of a particular product or service, managers can determine whether it will be profitable to continue producing or selling it.

The Contribution Margin Approach Helps Managers in Short-Term Decision Making