Contribution Margins

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My Guru, Professor John Shank said that the use of contribution margins to select products is “a snare, a trap, and a delusion” because a firm will never drop a product that has a positive contribution margin for fear of losing even a small amount of profit. Explain the meaning of this argument with an example of an imaginary Fast Moving Consumer Goods (FMCG) company with imaginary numbers.

Word limit: 400-500 words(!)

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