How Should That Portion of Fixed Costs That Are Unavoidable

question 20

Multiple Choice

How should that portion of fixed costs that are unavoidable be handled when making a decision on whether to eliminate an unprofitable segment?

• A)They should be subtracted from the contribution margin and if that results in a net loss, the segment should be eliminated.
• B)They should not be considered as they are not relevant.
• C)They should be allocated to other segments.If that causes a loss in another segment, that segment should be eliminated as well.
• D)Fixed costs are never relevant.

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Definitions:

Average Annual

Average annual typically refers to the mean amount or figure calculated over a year's period, often used in financial, operational, or performance metrics.

Average Amount

The average amount refers to the arithmetic mean of a set of numbers or quantities, obtained by summing them together and then dividing by the count of these numbers.

Amortization Period

The duration of time over which the cost of an intangible asset is incrementally expensed or amortized to a company's financial statements.

Net Cash Inflows

The total amount of money received minus the total amount of money spent over a specific period of time.