Segmented Income Statements Are Used to Show Revenues, Expenses, and Income

Essay

Segmented income statements are used to show revenues, expenses, and income for major parts of an organization.
Required:
A. Consider a regional chain of department stores that has two or three stores in each of several cities. One way to segment this business is geographically. Describe another way of segmenting the firm.
B. Segmented income statements often distinguish between "fixed expenses controllable by the segment manager" and "fixed expenses traceable to the segment, but controllable by others." Assume that the Cleveland district has three retail stores. Give two examples of each type of fixed cost.
C. Common costs create difficulties when preparing segmented income statements. Define "common costs," give an example for the regional chain of department stores, and explain in general terms why such costs create a problem.