Segment margin income statements are most useful to managers when they are prepared
A)On a cash basis.
B)Using a segment contribution margin basis.
C)On a GAAP basis.
D)Using a function basis.

Question

Quizplus · Accepted Answer

Segment contribution margin income statements provide information on the profitability of each segment based on their contribution margin (revenue minus direct variable costs) and do not include fixed costs or overhead expenses. This information is most useful to managers for making decisions related to product mix, pricing and cost control within each segment. Therefore, option B is the best choice. Option A (cash basis) does not differentiate between variable and fixed costs and may not be as useful for decision-making. Option C (GAAP basis) includes all expenses, including fixed costs and overheads, and may not allow managers to identify the contribution margin and profitability of each segment. Option D (function basis) is not a commonly used method for preparing income statements and may not provide the necessary information for managerial decision-making.

Segment Margin Income Statements Are Most Useful to Managers When