If a Product Has a Positive Segment Margin but Is

question 160

Essay

If a product has a positive segment margin but is not as profitable as other products, what should managers do? What if the segment margin is negative?

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Definitions:

Underapplied Overhead

This refers to the situation where the allocated manufacturing overhead cost is less than the actual overhead cost incurred.

Cost of Goods Sold

The immediate expenses linked to the manufacture of goods a company sells, which covers both materials and workforce.

Material

Substances or components that are used in the production or manufacturing of goods.

Underapplied Overhead

Happens when the overhead costs assigned to manufacturing are lower than the overhead expenses that were actually incurred.