Question
An organization is trying to determine whether it should continue to provide a service. Assume the following: i. They have signed a one-year commitment to
An organization is trying to determine whether it should continue to provide a service. Assume the following: i. They have signed a one-year commitment to pay all of their fixed costs (building, staff, etc.) ii. They are not at capacity iii. There is no better alternative for using the fixed resources. If the contribution margin of a service is negative and no other additional fixed costs will be incurred, then it is in the best financial interest of the organization to:
a. Continue to provide additional units of that service, only if the organization is fully covering all of its other costs.
b. Discontinue providing additional units of that service if the organization is unable to fully cover all of its other costs
c. Discontinue providing additional units of that service
d. Continue to provide additional units of that service, even if the organization is not fully covering all of its other costs
e. Continue to provide additional units of that service, only if the organization can cover its fixed avoidable costs
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