Consider the Following Portion of a Segmented Income Statement for the Year

question 3

Multiple Choice

Consider the following portion of a segmented income statement for the year just ended. Assume fixed expenses of Division A include $60,000 of direct expenses and that the discontinuance of the department will not affect the sales of the other departments or reduce the common expenses. $\begin{array}{lr}\text { Division } A\\\text { Sales } & \$ 200,000 \\\text { Variable manufacturing costs } & 120,000 \\\text { Gross profit } & \$ 80,000 \\\text { Fixed expenses (direct and allocated) } & 100,000\\\text { Operating income (loss) }&\$(20,000) \end{array}$ What is A's divisional segment margin?

• A) $20,000 net loss
• B) $20,000 net income
• C) $40,000 net income
• D) $80,000 net income

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Definitions:

Diversity Of Products

Refers to the variety of different items a company offers to meet the varied preferences of its consumers.

Monopolistic Competitor

A firm operating in a market structure where many companies sell products that are similar but not identical, allowing for significant differentiation and some degree of market power.

Product Differentiation

The marketing and production strategy of making a product distinguishable from other similar products in the market by emphasizing its unique features.

Monopolistic Competitor

A monopolistic competitor refers to a market structure in which many companies sell products that are similar but not identical, allowing for significant differentiation and some degree of market power.