11) When a department showing a loss is eliminated, other departments will always achieve a greater contribution margin.
12) Direct expenses and indirect expenses are separated in determining contribution margin.
13) Direct expenses are assigned to departments based on the actual expenses incurred.
14) Eliminating one department may increase the sales of another department.
15) Department contribution margin equals gross profit on sales minus indirect departmental expenses.
16) Departmental income statements would not be a useful to tool for management to determine the viability of a department.
17) A department should always be eliminated when it becomes unprofitable.
18) A net income would occur if the contribution margin is less than indirect expenses.
19) Trends in the industry, such as advancements in technology, should always be a consideration in determining whether or not a department is eliminated.
20) The availability of suppliers and a firm’s potential capacity is a consideration before a department is added.