Question

If an unprofitable segment is eliminated:

a. income will always increase.
b. variable costs of the eliminated segment will have to be absorbed by other segments.
c. costs allocated to the eliminated segment will have to be absorbed by other segments.
d. income will always decrease.

Answer 1

When an unprofitable segment is eliminated, the costs allocated to the eliminated segment will have to be absorbed by other segments, which can lead to a decrease in income if the other segments cannot generate enough revenue to cover the additional costs.

Step-by-step explanation:

When an unprofitable segment is eliminated, the costs allocated to the eliminated segment will have to be absorbed by other segments. This means that the other segments will have to take on the expenses previously assigned to the eliminated segment. This can cause a decrease in income, especially if the other segments are not able to generate enough revenue to cover the additional costs.