If an unprofitable segment is eliminated
A) it is impossible for net income to decrease.
B) fixed expenses allocated to the eliminated segment will be eliminated.
C) variable expenses of the eliminated segment will be eliminated.
D) it is impossible for net income to increase.

Question

Quizplus · Accepted Answer

Variable expenses of the eliminated segment will indeed be eliminated. This is because variable expenses are directly tied to the production or sales volume of a segment. If the segment is no longer operating, these expenses cease.

If an Unprofitable Segment Is Eliminated