The absolute profitability of a business segment is determined by:
A)subtracting the variable costs of the business segment from its revenue.
B)subtracting the avoidable costs of the business segment from its revenue.
C)subtracting the full costs, including allocations of common fixed costs, of the business segment from its revenue.
D)finding the larger of the segments full costs or its revenues.

Question

Quizplus · Accepted Answer

The avoidable costs of a business segment are the costs that can be avoided if the segment is discontinued. These costs include the variable costs of the segment, as well as any fixed costs that are specific to the segment. By subtracting the avoidable costs from the revenue of the segment, we can determine the absolute profitability of the segment.

The Absolute Profitability of a Business Segment Is Determined By