When Deciding Whether to Discontinue a Segment of a Business

question 112

Multiple Choice

When deciding whether to discontinue a segment of a business, relevant costs include ________.

• A) auditing expenses for the whole company
• B) fees paid to a management consultant to study the feasibility of the business segment
• C) annual insurance costs of the company
• D) future administrative costs that can be eliminated

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Definitions:

Circular Flow Model

An economic model illustrating the continuous movement of goods, services, and money among households and businesses in an economy.

Market System

An economic system in which decisions regarding investment, production, and distribution are based on supply and demand, and prices of goods and services are determined in free markets.

Inefficiency

A condition where resources are not used in the most economically beneficial way, leading to wasted resources or less-than-optimal outcomes.

Communist Central Planning

An economic system where all major production decisions are made by the government, with an aim of allocating resources according to a comprehensive plan.