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

Question

Quizplus · Accepted Answer

The increase in profits would be equal to the increase in sales times the contribution margin ratio, not the segment margin ratio. The segment margin ratio includes traceable fixed expenses, which do not change with sales.

Assuming That a Segment Has Both Variable Expenses and Traceable