Discontinuing a product or segment is a huge decision that must be carefully analyzed. Which of the following would be a valid reason not to discontinue an operation?
A) Losses are minimal.
B) Variable costs are less than revenues.
C) Variable costs are more than revenues.
D) Allocated fixed costs are more than revenues.

Question

Quizplus · Accepted Answer

Variable costs being less than revenues means that the operation is at least covering its variable costs and contributing towards fixed costs and potentially profit. This is a valid reason not to discontinue an operation, as it indicates the operation is financially viable to some extent.

Discontinuing a Product or Segment Is a Huge Decision That