What decision rule should be followed when deciding if a business segment should be eliminated?
A)Segments generating a net loss should always be eliminated.
B)Segments with revenues that are more than avoidable expenses should be considered for elimination.
C)Segments with revenues that are more than unavoidable expenses should be considered for elimination.
D)Segments with revenues that are less than avoidable expenses should be considered for elimination.
E)Segments with revenues that are less than unavoidable expenses should be considered for elimination.

Question

Quizplus · Accepted Answer

Segments with revenues that are less than avoidable expenses should be considered for elimination. This is because the avoidable expenses are the costs that can be eliminated if the segment is discontinued. By comparing revenues to avoidable expenses, the decision maker can determine if the segment is profitable or not. If the revenues are less than avoidable expenses, it means the segment is generating a net loss and eliminating it would be the most financially beneficial decision.

What Decision Rule Should Be Followed When Deciding If a Business