In Determining Whether a Segment Should Be Reported, a Profit

question 10

Multiple Choice

In determining whether a segment should be reported, a profit and loss test can be used.The test selects segments for reporting by:

• A)​only including profitable segments.
• B)​comparing the absolute value of a segment's profit or loss to 10% of all segments cumulative profit or cumulative loss, whichever is higher.
• C)​comparing the absolute value of a segment's profit or loss to 10% of all segments combined profits and losses.
• D)​comparing the profit or loss of a segment to 10% of all segment external revenue.

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Definitions:

Total Variable Cost

The sum of expenses that vary directly with the level of production, such as raw materials and direct labor.

Marginal Cost

The expenditure involved in the production of one extra unit of a product.

Marginal Cost

The sum required to produce an extra unit of a product or service.

Variable Input

An input in the production process that can be adjusted in the short run to change the level of output, such as labor hours or raw materials.