Question

Using the contribution approach for analyzing segment profitability and assuming all else remains constant in year 2, what would be the profit impact of dropping the west region in year 2?

Answer 1

The profit impact of dropping west region in year 2 would cause a considerable decline in profitability. The more you contribute, the more you receive back, and dropping this region decreases the probability of success. Keep the region and make sure all else remains constant.