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Assume a merchandising company is deciding whether to keep or drop one of the many product lines that it sells at its retail store location. Which of the following would be irrelevant to the decision? Multiple Choice The product's sales The product's variable expenses The product's traceable fixed expenses The product's allocated common fixed expenses
Assume a merchandising company is deciding whether to keep or drop one of the many product lines that it sells at its retail store location. Which of the following would be irrelevant to the decision? Multiple Choice The product's sales The product's variable expenses The product's traceable fixed expenses The product's allocated common fixed expenses
The product's allocated common fixedexpenseswould be irrelevant to the decision of whether to keep or drop one of the product lines at the retail store location.Understanding CommonFixedExpenses: Common fixed expenses are costs that cannot be directly traced to a specific product or product line.These expenses are incurred for the overall operation of the retail store location, such as rent, utilities, salaries of store managers, and general administrative costs.They are allocated among various products or departments based on certainallocationmethods, such as sales revenue or square footage.Decision to Keep or Drop a Product Line: When evaluating whether to keep or drop a product line, the decision typically revolves around the profitability andperformanceof that specific product line.The key considerations include sales revenue, variable costs directly associated with the product, contribution margin, market demand, and potential growth opportunities.Relevance of Allocated Common Fixed Expenses: The allocated common fixed expenses are typically consideredirrelevantto the decision of whether to keep or drop a product line for several reasons:a. Common Allocation: Allocated common fixed expenses are divided among different product lines based on an allocation method. Therefore, they do not accurately reflect the true cost orprofitabilityof each individual product line.Thus, relying on allocated common fixed expenses to make decisions about a specific product line's viability may lead to inaccurate conclusions.b.SunkCosts: Common fixed expenses are usually incurred regardless of whether a particular product line is kept or dropped. These expenses are typically unavoidable and not affected by the presence or absence of a specific product line.Therefore, they do not provide useful information for evaluating the profitability or viability of a product line.To learn more aboutsunk, refer below:brainly.com/question/11399018#SPJ11...