In a situation where a division has variable costs and avoidable fixed costs, and these costs combined exceed income, then based only on the financials the division should be closed.

Question

Quizplus · Accepted Answer

If the combined variable costs and avoidable fixed costs of a division exceed income, then the division is operating at a loss. Continuing to operate the division would only result in further losses, and therefore it would be financially wise to close the division.

In a Situation Where a Division Has Variable Costs and Avoidable