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For a retail outlet chain with multiple stores, which of the following statements would be correct?
Select one:
a. Stores which have a net loss should be discontinued.
b. Stores with a negative contribution margin should be discontinued.
c. Stores with a negative contribution margin should be discontinued provided such discontinuation will not cause an increase in sales at other stores.
d. Stores with a negative contribution margin should not be discontinued if such discontinuation will cause profitable stores to bear a portion of the unprofitable store’s overhead.
Expert Answer
For a retail outlet chain with multiple stores, which of the following statements would be correct?
Ans: B. Stores with a negative contribution margin should be discontinued.
Negative contribution Margin means a company is experiencing a loss for each unit of product sold. With the increase in sales, results only in increase in total losses for the company.
