Wednesday, April 9, 2008

Characteristics of Segment Reporting

A Segment is any part or activity of a business organization which a managers needs cost, revenue, or profit data

Characteristics of Segmented Reporting (performance report)

  • contribution income format
  • traceable fixed costs should be separated from common fixed costs to enable the calculation of a segment margin

The traceable fixed costs of one segment can be common fixed cost of other segments.

Common costs should not be arbitrarily allocated to segments based on the fact that a profitable business segment appear to be unprofitable forces managers to be held accountable for costs they cannot control

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