Discontinuing a Product or Segment Is a Huge Decision That

question 81

Multiple Choice

Discontinuing a product or segment is a huge decision that must be carefully analyzed. Which of the following would be a valid reason not to discontinue an operation?

• A) Losses are minimal.
• B) Variable costs are less than revenues.
• C) Variable costs are more than revenues.
• D) Allocated fixed costs are more than revenues.

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Definitions:

Budgeted Overhead

An estimate of the total indirect costs that are expected to be incurred during a specified period in the production process.

Actual Production

The total quantity of goods or services produced by a company during a specific period, measured to assess operational efficiency and effectiveness.

Direct Labor Cost

The total cost of all labor that is directly involved in the production of goods or services.

Manufacturing Overhead

The indirect factory-related costs that are incurred when producing a product.