A Segment of an Organization Is Any Part of the Organization

Essay

A segment of an organization is any part of the organization that management wishes to evaluate. Segment margin income statements highlight the elements under the segment manager’s control.

Required:

a. What is “segment margin” and how is it calculated?

b. What is the difference between “segment margin” and a segment’s “net operating income?”

c. Why are common allocated fixed costs an issue in evaluating the performance of a segment manager?