In deciding on the future status of an unprofitable segment management should recognize that net income could decrease by eliminating the unprofitable segment.

Question

Quizplus · Accepted Answer

Eliminating an unprofitable segment may result in the loss of its contribution margin, which could lead to a decrease in net income. However, it may be necessary to eliminate the segment in order to improve overall profitability in the long term.

In Deciding on the Future Status of an Unprofitable Segment