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:

Variable Cost

Costs that change in proportion to the level of output or production activity.

Baking Supplies

Items and ingredients specifically used for the process of baking, such as flour, yeast, baking soda, and baking pans.

Law of Diminishing Returns

This economic law states that as one factor of production is increased while others are held constant, the incremental gains in output will eventually diminish.

Product Outputs

The quantity of goods or services produced by a business or economy in a given period.