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How do managers go about making segment product line elimination decisions?

How do managers go about making segment product line elimination decisions?

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Answer #1

Decisions for eliminating product line segment :

If the product line is not profitable

If risk and rewards cant be identifiable with distinguishment

Decrease in total contribution margin is is lesser than decrease in fixed cost

If product shows decline in its market which cannot be reinstated that is permanent fall

If more fixed costs can be avoidable from discontinuing the segment

Such discontinuance of segment should not have adverse effect on other segments

Through trend analysis and budgeted financial statements of respective segments

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