Question

Giant inc. is thinking about eliminating one of its unprofitable product lines. when conducting incremental analysis related to this decision, giant should ________ costs associated with the discontinued product line will remain.

Answer 1

When conducting incremental analysis related to the decision if it should eliminate one of its unprofitable product lines, Giant should assume a percentage of fixed costs associated with the discontinued product line will remain, where fixed costs are the costs that have to be paid by a company, independent of any business activity. They are not variable.