Assuming That a Segment Has Both Variable Expenses and Traceable

question 57

True/False

Assuming that a segment has both variable expenses and traceable fixed expenses,an increase in sales should increase operating income by an amount equal to the sales multiplied by the segment margin ratio.

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Definitions:

Salvage Value

Salvage value is the estimated resale value of an asset at the end of its useful life.

Incremental Borrowing Rate

This is the interest rate a company would have to pay if it borrows funds to finance a lease transaction, used in lease accounting to measure lease liabilities under accounting standards.

Implicit Rate

An interest rate implicit in the terms of a lease or other contract, representing the lessor's cost of capital or the lessee's incremental borrowing rate, not explicitly stated.

Leveraged Lease

A leasing arrangement in which the lessor uses borrowed funds to acquire the asset that is then leased out, allowing the lessor to benefit from tax advantages and leverage.