Deciding whether to Drop a Product Line

When deciding whether to drop a product line, the only things that should be considered are the contribution margin provided by the product line and the fixed costs that could be avoided by dropping the product line. This is important because fixed costs are sometimes allocated to product lines, which can distort managerial decision-making by creating the appearance that the firm would be more profitable by dropping a product line that may appear unprofitable because it is being allocated fixed costs that would not disappear if the product line were dropped.-
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[@nefelikoti7589]

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Happy to hear that! I hope you ace the exam!

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You probably still failed

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I never got while self study this video brought me to light from dark many thanks

[@lusi5245]

Awesome video, helped me a lot! Very easy to understand!

[@Edspira]

Liubovi, I'm glad this video helped you out! Just this last week I added 134 managerial accounting videos to my website. These will always be free of charge to view, and there will eventually be quizzes and exercises for you to test your knowledge as well. Thanks for watching! edspira.com/courses/managerial-accounting

[@krizamaeconsumido2840]

OMG thanks for this clear discussion 😭

[@Jane-ck6cj]

simple and easy to understand. Thanks!

[@missfortune1123]

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[@sydbarnes9006]

I would get rid of the truck division then increase production of cars

[@MHKing03]

Sounds good but that assumes you will sell more cars. Depending on how much crossover exists between these two markets, that might work, or you might end up losing money.

[@jiweipeng3780]

Thank you! It's very well explained.

[@ThePsychoGamerYT]

I will comment on every video your saving me in

[@user-gc9mq7fl7l]

Is dropping a product line the same as closure of a business unit?

[@magdelinetivane1353]

Shouldn't the operating profit for cars be 30000 (50000-20000)

[@calida1443]

thank you so much

[@2gbramplayercodm]

Thank you so much

[@IT-wm6hm]

Great video. What about fixed cost with depreciation?

[@NotBen101]

Well if there was a machine for the truck division and the truck division only. The asset would presumably be sold and the depreciation expense would go away. However, if it were for the truck and the auto division the depreciation expense would stay.

[@noelvito9689]

Is it said that one of the most critical stages in product development is the product discontinuation phase?

[@melodysandangombe1685]

It's really helpful

[@tonykallon2383]

This is awesome

[@zszsdzxkjvnzkjlnvlzkjcnj]

Great video.

[@Rebecca-hi6xm]

Wouldn't building rent be an irrelevant fixed cost though?

[@row0111]

it is an irrelevant cost but in this situation, the $20000 cost will occur no matter what. So removing the trucks will remove its contribution to paying down some of the fixed costs.

[@nfs8904]

2:47🤣🤣

[@cmajorpiano7041]

by dropping trucks we saved fixed salary of 50000, how come we made 0 profit in the entity . i think it should be 50000 coz if we drop we also fire the trucks manager

[@RainMan221]

Yes I have the same doubt

[@lydiaadhiambo4754]

50000-40000 how do u get zero ??

[@AlexNiles64]

90,000 - 50,000 - 40,000 = 0 (Contribution margin) - (salaries) - (Building rent) = 0

[@Emma-vc8iw]

why salary can be avoided? it is a fixed cost

[@meetzoh3969]

If you get rid of the truck division, you get rid of the employees. No employees. No salary