Bone Dry retailers is considering closing down one of its low-profit departments. Assume that discontinuance of this department will not affect sales of the remaining departments. Which of the cost classifications below should be compared with departmental income to determine whether or not to close the department?
A) Variable costs
B) Avoidable costs
C) Controllable costs
D) Fixed costs

Question

Quizplus · Accepted Answer

The cost that should be compared with departmental income to determine whether or not to close the department is avoidable costs. These are costs that can be eliminated if the department is closed. By comparing the avoidable costs with departmental income, Bone Dry retailers can determine whether or not the department is profitable and should be kept open.

Bone Dry Retailers Is Considering Closing Down One of Its