Discontinuing Unprofitable Products Will Increase Profitability

question 25

Multiple Choice

Discontinuing unprofitable products will increase profitability:

• A)automatically
• B)if the resources no longer required by the discontinued product can be eliminated
• C)when a large portion of the fixed costs are unavoidable
• D)if capacity constraints are adjusted

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Definitions:

Cost Of Merchandise Sold

This is the total cost incurred to produce or acquire the goods sold by a company during a specific period.

Debit Balance

An account balance that occurs when the total amount of debits exceeds the total amount of credits in an account.

Accounts Payable

A liability account on the balance sheet, representing the company's obligation to pay off a short-term debt to its creditors or suppliers.

Sales Tax Payable

The amount of sales tax collected from customers that a business owes to the government.