Question

If a product or other segment of a business is generating a loss, it is erroneous to assume that the total company income will increase by eliminating the product line or other segment of the business generating the loss.

a.This statement is true.
b.This statement is true only for manufacturing companies.
c.This statement is true only for service companies.
d.This statement is false.

Answer 1

a.This statement is true.

Step-by-step explanation:

The loss generating segment of a business might be generating a contribution towards the firms` common fixed overheads thus, it would be erroneous to assume that the total company income will increase by eliminating the product line or other segment. Eliminating this product line or other segment might result in loss of a contribution to cover the fixed costs.