Segmented Income Statements Are Used to Show Revenues, Expenses, and Income

question 67

Essay

Segmented income statements are used to show revenues, expenses, and income for major parts of an organization.
Required:
A. Consider a regional chain of department stores that has two or three stores in each of several cities. One way to segment this business is geographically. Describe another way of segmenting the firm.
B. Segmented income statements often distinguish between "fixed expenses controllable by the segment manager" and "fixed expenses traceable to the segment, but controllable by others." Assume that the Cleveland district has three retail stores. Give two examples of each type of fixed cost.
C. Common costs create difficulties when preparing segmented income statements. Define "common costs," give an example for the regional chain of department stores, and explain in general terms why such costs create a problem.

Understand the relationship between marginal revenue and profit maximization.

Comprehend the concept of economic profits and losses in the long run under perfect competition.

Acknowledge the impact of technology and the Internet on market competition and knowledge.

Understand the price, marginal revenue, average total cost, and marginal cost under perfect competition.

---

Definitions:

Annual Payments

Payments that are due once per year, commonly used in the context of loans, leases, or other financial agreements.

Compounded Annually

Refers to the process of calculating and adding interest to the principal amount of an investment or loan once per year.

Incremental Borrowing Rate

The interest rate a lessee would have to pay to borrow funds over a similar term, and with a similar security, to lease a comparable asset.

Balance Sheet

A financial statement that provides a snapshot of a company’s financial position at a particular point in time, showing assets, liabilities, and shareholders' equity.