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Infinitez Infinitez
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A segment of an organization is any part of the organization that management wishes to evaluate. Segment margin income statements highlight the elements under the segment manager's control.

Required:

a.What is "segment margin" and how is it calculated?
b.What is the difference between "segment margin" and a segment's "net operating
income?"
c.Why are common allocated fixed costs an issue in evaluating the performance of a
segment manager?
Textbook 
Managerial Accounting

Managerial Accounting


Edition: 4th
Author:
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olskeeolskee
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More solutions for this book are available here
a.The segment margin is the amount of operating income under the control of the
segment manager. The segment margin excludes all allocated costs. Segment margin is calculated by subtracting only the traceable fixed costs from the contribution margin of the segment.
b.Segment margin is the segment's contribution margin less traceable fixed costs. Net
operating income is the total of segment margins for each segment less common fixed costs. Segment margins relate to each individual segment and net operating income shows relates to the company as a whole.
c.Common allocated fixed costs are an issue in evaluating performance because the
segment manager has no control over the common fixed cost. Common fixed costs are not traceable to individual segments.

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