Assuming that a segment has both variable expenses and traceable fixed expenses,an increase in sales should increase operating income by an amount equal to the sales multiplied by the segment margin ratio.

Question

Quizplus · Accepted Answer

The increase in operating income will be less than the sales multiplied by the segment margin ratio because the segment margin ratio only accounts for variable expenses and traceable fixed expenses, not the increase in sales volume's impact on these expenses or any non-traceable fixed expenses.

Assuming That a Segment Has Both Variable Expenses and Traceable