A particular product line should not be dropped if:

Question

Quizplus · Accepted Answer

Dropping a product line should only be considered if the avoidable fixed costs associated with that product line are greater than its contribution margin. Avoidable fixed costs are costs that can be eliminated if the product line is dropped. If the contribution margin is greater than the avoidable fixed costs, the product line is still generating a positive contribution to the company's profits. Options A, C, and D are incorrect because they do not consider the concept of avoidable fixed costs.

A Particular Product Line Should Not Be Dropped If