Question
The W.E. Canelp Clinic is deciding whether or not to install a new analyzer. Although the analyzer will not generate any revenues, it is expected
The W.E. Canelp Clinic is deciding whether or not to install a new analyzer. Although the analyzer will not generate any revenues, it is expected to save the clinic $20,000 in resources per year. The additional fixed costs per year associated only with the analyzer are $10,000. Variable costs per year associated with the analyzer are estimated to be $4,000. Other organizational overhead costs per year are estimated to be $7,000. Based on this information only, should the clinic purchase the analyzer?
-Yes, because the contribution margin is positive
-Yes, because the product margin is positive
-No, because the product margin is negative
-No, because the analyzer does not cover all costs
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