Which of the Following Is True of Segment Profitability Analysis

question 107

Multiple Choice

Which of the following is true of segment profitability analysis?

• A)It suggests eliminating all segments having positive margins.
• B)It includes the preparation of a segmented income statement.
• C)It traces common fixed costs to individual segments.
• D)It treats common fixed costs as avoidable costs.

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Definitions:

Activity Base

An activity base is a measure used in managerial accounting to allocate costs, based on activities that drive costs, as part of activity-based costing (ABC).

Service Departments

Departments within a company that support the primary operations but don't directly generate revenue.

Profit Margin

A financial metric used to assess a company's profitability by comparing net income to sales; calculated as (Net Income / Sales) * 100.

Income From Operations

The earnings generated from a company’s core business activities, excluding any gains or losses from investments and other non-operational sources.