Profits for one of Company X's flagship products have been declining slowly for several years. The CFO investigated and determined that inflation has raised the cost of producing the product but consumers who were surveyed reported that they felt the product’s functionality didn't justify a higher price. As a result, the CFO recommended that the company stop producing this product because the CEO only wants products whose profit margins are increasing.
The answer to which of the following questions would be most useful in evaluating whether the CFO's decision to divest the company of its flagship product is warranted?
A. Does the company have new and profitable products available with which to replace the flagship product?
B. Will the rest of Company X's management team agree with the CFO's recommendation?
C. Can Company X sell the flagship product to new markets to increase its customer base?
D. Are there additional features that could be added to the product without raising the unit price?
E. What percentage of Company X's revenues is represented by sales of the flagship product in question?
I'd appreciate any help, thank you.
I think this question is poorly written in because of 'unit price' shouldn't it read 'unit cost'? If you added features without increasing the unit price yes people may continue to purchase the product however, if these new feature increased you unit cost then your profit margins would decrease thus creating an issue for the CFO. If the answer choice read 'add features without increasing the unit cost' then this question is a no brainer, I got it right but I was confused as to why they worded it like this.