3. It appears that the local commercial market is losing money and the company would be better off
dropping this market segment. However, as discussed in Problem 8-29, not all of the costs included
above may be avoidable. If more than $77,625 of the total costs of $257,625 is not avoidable, then
the company really isn’t losing money on the local commercial market and the segment should not be
dropped. These issues will be discussed in more depth in Chapters 12 and 13.
Problem 8-29 (30 minutes)
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