Main Manufacturing Corporation reported consolidated revenues of $50,000,000 on its income statement for 20X8.The management of the corporation identified 3 industry segments,M,N,and O.These segments had the following intersegment sales and transfers during 20X8: For Main Manufacturing Corporation,the revenue test would be satisfied if any of its industry segments had revenue equal to or greater than which of the following?
A) $7,400,000
B) $5,740,000
C) $5,000,000
D) $4,260,000

Question

Main Manufacturing Corporation reported consolidated revenues of $50,000,000 on its income statement for 20X8.The management of the corporation identified 3 industry segments,M,N,and O.These segments had the following intersegment sales and transfers during 20X8:  For Main Manufacturing Corporation,the revenue test would be satisfied if any of its industry segments had revenue equal to or greater than which of the following?
A) $7,400,000 
B) $5,740,000 
C) $5,000,000 
D) $4,260,000

Quizplus · Accepted Answer

To satisfy the revenue test, Main Manufacturing Corporation must have an industry segment with revenues that are 10% or more of the combined revenues of all reported industry segments.

To determine which industry segment satisfies this condition, we need to calculate the revenue for each segment. From the given intersegment sales and transfers, we can obtain the following segment revenues:

Segment M: $7,400,000 
Segment N: $4,260,000 
Segment O: $5,740,000

Since Segment M has revenues equal to or greater than 10% of the combined revenues of all segments (i.e., $7,400,000/$17,400,000 = 42.53%), it satisfies the revenue test. Therefore, the best choice is B ($5,740,000).

Main Manufacturing Corporation Reported Consolidated Revenues of $50,000,000 on Its