1. A segment elimination decision involves a comparison between revenue that will be lost through the elimination and the

total cost of operating the segment.

fixed cost of operating the segment.

outsourcing costs of operating the segment.

avoidable cost of operating the segment.

2.

Based on the segment income statement below, Chips, Inc. is considering eliminating its Barbecue Division line.

Revenue from Barbecue Division sales	$	500,000
Salaries for Barbecue Division workers		(100,000)
Direct material		(300,000)
Sunk costs (equipment depreciation)		(75,000)
Allocated company-wide facility-sustaining costs		(50,000)
Net loss	$	(25,000)

If the Division is eliminated, what is the total amount of avoidable cost?

$400,000.

$475,000.

$525,000.

$550,000.

2b

If Barbecue Division were eliminated, profitability would

increase $25,000.

increase $525,000.

decrease $100,000.

decrease $25,000.