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.

Question

Quizplus · Accepted Answer

Segment profitability analysis includes the preparation of a segmented income statement, which enables the management to understand the profitability of each segment of the business. The other options are incorrect as segment profitability analysis does not suggest eliminating all segments having positive margins, it traces common fixed costs to individual segments, and the treatment of common fixed costs as avoidable costs is not appropriate in such analysis.

Which of the Following Is True of Segment Profitability Analysis