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These decisions involve applying the concept of both contribution margin and breakeven analysis to make the best decision for the company. When evaluating the financial position of the company, Maria must analyze the contribution margins of the products supplied by Aunt Connie's Cookies to determine the direction of the company. Maria must also evaluate the breakeven point of the company when making a decision on whether or not to purchase another company.
According to Marshall, McManus and Viele, the contribution margin is defined as the contribution to fixed expenses and operating income from the sale of product or provision of service (2004)...
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