Asked by juan david jimenez vargas on Apr 29, 2024
Verified
In deciding on the future status of an unprofitable segment management should recognize that net income could decrease by eliminating the unprofitable segment.
Unprofitable Segment
A division or branch of a company that does not generate profit and may cause a financial drain on the business.
- Comprehend the effects of discontinuing a non-profitable product line on the overall net earnings.
Verified Answer
KS
Kayla SuttonMay 03, 2024
Final Answer :
True
Explanation :
Eliminating an unprofitable segment may result in the loss of its contribution margin, which could lead to a decrease in net income. However, it may be necessary to eliminate the segment in order to improve overall profitability in the long term.
Learning Objectives
- Comprehend the effects of discontinuing a non-profitable product line on the overall net earnings.
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