Managerial Accounting

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Varrit Co. Impact of Discontinuing A Product Line

MGRACT-JNWZMW

Varrit Co. wants to discontinue the SouthEast division because it is unprofitable.

When will eliminating SouthEast improve overall organizational profits (assume no product-specific avoidable fixed costs)?

A

SouthEast has a positive contribution margin.

B

All fixed costs allocated to SouthEast can be absorbed by other product lines.

C

All of the fixed costs allocated to SouthEast are unavoidable.

D

SouthEast has a negative contribution margin.