Certified Supply Chain Professional (CSCP) Practice Exam

What should organizations do regarding goods/services with a positive contribution margin?

1. Support them exclusively

2. Monitor their performance

3. Retire those with low margins

4. Invest heavily in marketing

The correct answer is: Support them exclusively

Supporting goods and services with a positive contribution margin is a sound strategy because it indicates that these products or services contribute positively to covering fixed costs and generating profit. When a product demonstrates a positive contribution margin, it means that the revenue it generates exceeds the variable costs associated with producing and selling it. This is crucial for a company’s financial health, as it not only helps in covering ongoing operational expenses but also allows for reinvestment in other areas of the business, including product development, operational improvements, or further marketing efforts. An organization might choose to focus its resources and efforts on these profitable goods or services to maximize overall profitability. This can involve streamlining processes, enhancing production efficiency, or increasing the sales efforts directed toward these offerings. While it is important to monitor performance, retiring low-margin offerings, or investing heavily in marketing might not be as effective without the foundational strategy of supporting the high-margin items. Monitoring can help ensure that the positive contribution margin remains and continues to grow, but the emphasis on support is critical to capitalizing on their profitability potential.