The Potential Effects of the Decision to Eliminate a Line

question 10

Multiple Choice

The potential effects of the decision to eliminate a line of business on existing employees and the community are

• A) ignored in incremental analysis.
• B) quantitative factors.
• C) qualitative factors.
• D) opportunity costs.

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Definitions:

Common Fixed Expenses

Expenses that remain constant in total regardless of changes in the level of activity or volume of output within a certain range.

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs and treats fixed manufacturing overhead as a period expense.

Contribution Format

A method of profit reporting that separates fixed and variable costs, highlighting the contribution margin of products, services, or business segments.

Variable Costing

A technique in managerial accounting where only variable production costs are charged to product units, differentiating it from absorption costing by not including fixed overhead.