A Company Should

question 57

Multiple Choice

A company should

• A)eliminate any segment in which the contribution margin is less than the fixed costs that are unavoidable.
• B)eliminate an unprofitable product line as it will always increase the total profits of a company.
• C)eliminate an unprofitable product as fixed expenses allocated to the eliminated segment will likely be eliminated.
• D)identify the relevant costs in deciding whether to eliminate an unprofitable segment.

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Definitions:

Accounts Payable

Money owed by a company to its suppliers or creditors for goods or services received but not yet paid for.

Equipment

Tangible personal property that is used in operations, such as machinery, computers, and furniture, which is not intended for sale.

Closing Entries

At the conclusion of an accounting period, closing entries refer to the journal entries that are recorded to move the balances from temporary accounts to permanent accounts, which helps in getting the accounts ready for the upcoming period.

Classified Balance Sheet

A balance sheet that organizes assets and liabilities into subcategories such as current and long-term.