Henry Company Is Preparing a Segmented Income Statement, Subdivided into Departments

question 64

Multiple Choice

Henry Company is preparing a segmented income statement, subdivided into departments (billing, purchasing, and telemarketing) . Which of the following choices correctly describes the accounting treatment of the firm's compensation cost for key executives (president and vice-presidents) ?

• A) The cost is charged to the departments.
• B) The cost is not charged to the departments because, although easily traceable to the departments, it is not controllable at the departmental level.
• C) The cost is not charged to the departments because, although controllable at the departmental level, it is not easily traceable to the departments.
• D) The cost is not charged to the departments because it is both easily traceable to the departments and controllable by the departments.
• E) The cost is not charged to the departments because it is neither easily traceable to the departments nor controllable by the departments.

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Definitions:

Recession

A period of GDP contraction that lasts for at least two consecutive quarters within 1 year.

Economic Exposure

A company’s exposure to unexpected change in foreign exchange rates.

Forward Exchange Rate

A financial term describing an agreed exchange rate for the future exchange of two currencies, used primarily for hedging against foreign exchange risk.

Government Policy

The strategic plans and decisions made by government leaders and agencies that determine the direction of national, state, or local governance.