When a product or segment of a business is determined to be generating a loss, the total income from operations for the company will always increase if management eliminates the product or segment.

Question

Quizplus · Accepted Answer

This statement is not always true. Eliminating a product or segment may result in a decrease in total income from operations if the revenue generated by that product or segment was greater than the cost of producing it. It is important for management to carefully analyze the financial impact before making a decision to eliminate a product or segment.

When a Product or Segment of a Business Is Determined