Discontinuing unprofitable products will increase profitability:
A)automatically
B)if the resources no longer required by the discontinued product can be eliminated
C)when a large portion of the fixed costs are unavoidable
D)if capacity constraints are adjusted

Question

Quizplus · Accepted Answer

Discontinuing unprofitable products will only increase profitability if the resources (e.g. labor, raw materials, equipment) that were used for the discontinued product can now be redirected towards other products or activities that generate profits. If these resources cannot be eliminated, then the cost savings from discontinuing the unprofitable product will be minimal or non-existent. Factors such as fixed costs and capacity constraints may also affect profitability, but they are not the sole determinants.

Discontinuing Unprofitable Products Will Increase Profitability