Question

In a segmented income statement, which of the following statements is true? a.Segment margin is greater than contribution margin. b.Common fixed expenses must be allocated to each segment. c.Contribution margin is equal to sales less all variable and direct fixed expenses of a segment. d.Segment margin is equal to contribution margin less direct and common fixed expenses. e.Segment margin is equal to contribution margin less direct fixed expenses.

Answer 1

Answer:

e.Segment margin is equal to contribution margin less direct fixed expenses.

Explanation:

The profit contribution each segment makes towards covering a firm's common fixed costs is called the segment margins and it is used to measure the change in a firm's profits that would in turn occur if the segment is eliminated.

mathematically represented by:

segment margin = contribution margin - direct fixed expenses