A Segment of an Organization Is Any Part of the Organization

question 153

Essay

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?

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Definitions:

Profit Maximization

A process or strategy used by businesses to achieve the highest possible profit, considering revenue and costs.

Shirking

The behavior of avoiding work or responsibilities, often seen in employment contexts where workers may not perform their duties optimally.

Worker's Output

The quantity of goods or services produced by an employee within a certain period of time.

Corporation

A legal entity that is separate and distinct from its owners, who are shareholders, and is authorized to act as a single entity, legally endowed with rights and responsibilities.