If an unprofitable segment is eliminated it is impossible for net income to decrease. it is impossible for net income to increase. fixed expenses allocated to the eliminated segment will be eliminated. variable expenses of the eliminated segment will be eliminated.

Question

Business

Merritt

17 March, 06:31

If an unprofitable segment is eliminated it is impossible for net income to decrease. it is impossible for net income to increase. fixed expenses allocated to the eliminated segment will be eliminated. variable expenses of the eliminated segment will be eliminated.

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Answers (1)

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Vance Lindsey · Answer 1

The correct answer is variable expense will also be eliminated of the segment which got eliminated.

Explanation:

The segment in the business which is not profitable anymore, then that segment would be eliminated or removed, which will result in net income will always increase or rise. And the variable costs of that eliminated segment will be absorbed through other segments or will be eliminated.

Though the segment is removed, the fixed costs which is allocated to the segment will be covered still.

So, when the segment is eliminated, then the variable expense of that segment would be eliminated.