True. When considering the elimination of a segment, management should eliminate a segment if income increases from elimination.
What does it mean for management to eliminate segment?
A direct fixed cost is one that a certain sector directly contributes to. If the segment is discontinued, these expenses are gone. Expenses that are incurred by the entire company and distributed to the segments are referred to as assigned fixed costs.
A product, division, region, or other firm division may not be performing up to expectations or even be losing money. To eliminate its variable expenses and any associated operating losses, the corporation can think about ceasing to operate that section.
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