The Objective of Segment Profitability Decisions Is to Identify the Segments

question 151

True/False

The objective of segment profitability decisions is to identify the segments that have a negative segment margin so that managers can drop them or take corrective actions.

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Definitions:

Variable Costs

Costs that vary directly with the level of production or output, such as raw materials, packaging, and direct labor, which increase as production increases and decrease as production decreases.

Marginal Revenue

The additional income earned from selling one more unit of a good or service, an important concept in pricing and production decisions.

Total Revenue

The total amount of money generated by the sale of goods or services by a company before any costs are subtracted.

Barrier To Entry

Factors that prevent or inhibit new competitors from easily entering an industry or area of business, including high startup costs, strict regulations, and significant technological challenges.