When Deciding Whether to Discontinue a Segment of a Business

question 117

Multiple Choice

When deciding whether to discontinue a segment of a business, managers should focus on:

• A) The amount of operating income per unit produced by the segment.
• B) The amount of contribution margin per direct labor hour in the segment.
• C) How corporate-level administrative costs would be redistributed if the segment were eliminated.
• D) The cost of equipment from the segment that could go idle if the segment were discontinued.
• E) The total contribution margin generated by the segment relative to any traceable (avoidable) fixed costs associated with the segment.

---

Definitions:

Bond Premiums

The amount by which the market price of a bond exceeds its principal amount or face value, usually occurring when the market interest rate is below the coupon rate.

Interest Income

Income earned from deposit accounts or investments through the receipt of interest payments.

Fair Value

The estimated market value of an asset or liability, based on current conditions rather than historical cost.

Long-Term Investments

Investments in securities or other assets intended to be held for a period exceeding one year for capital growth or income generation.