Question

Incremental Analysis for Discontinuation Decision Total Contribution margin lost if special oats is discontinued Less: Fixed cost savings if special oats is discontinued Operating income if special oats is discontinued

Answer 1

Incremental Analysis for Discontinuation Decision can have two way affect to the Business

Explanation:

1. Contribution Margin Lost- If the special eats is discontinued then obviously it would affect (decrease) the profit margin that the Business would be enjoying before the product discontinues

Less:

2. Fixed Cost Saving - This would generally increase as the expenditure of the organisation would decrease.

Depending upon how the product performed the company can be benefited as well as incur loos at the same time .Discontinuation of a product is generally done when the company is facing losses.