If a segment is dropped,remaining segments must have sufficient contribution margin to cover their own direct costs and the
A)avoidable costs.
B)common costs.
C)uncommon costs.
D)none of these choices.

Question

Quizplus · Accepted Answer

If a segment is dropped, the remaining segments must still bear the common costs of the entire organization. Therefore, the remaining segments must have sufficient contribution margin not only to cover their own direct costs but also a portion of the common costs. Avoidable costs may or may not be relevant depending on whether they are directly tied to the dropped segment or not, and uncommon costs are not relevant to this decision.

If a Segment Is Dropped,remaining Segments Must Have Sufficient Contribution