Chapter 11 Student Version

Chapter 11 Student Version - 11-1MANAGERIAL...

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Unformatted text preview: 11-1MANAGERIAL ACCOUNTINGRSM222Reporting for ControlChapter 1111-2Decentralization and Segment ReportingAsegmentsegmentis any part or activity of an organization about which a manager seeks cost, revenue, or profit data. A segment can be . . .Quick MartAn Individual StoreA Service CentreA Sales Territory11-3Keys to Segmented Income StatementsThere are two keys to building segmented income statements:A contribution format should be used because it separates fixed from variable costs and it enables the calculation of a contribution margin.Traceable fixed costs should be separated from common fixed costs to enable the calculation of a segment margin.11-4Identifying Traceable Fixed CostsTraceable costsarise because of the existence of a particular segment and would disappear over time if the segment itself disappeared.No computer No computer division means . . .division means . . .No computerNo computerdivision manager.division manager.11-5Identifying Common Fixed CostsCommon costsarise because of the overall operation of the company and would not disappear if any particular segment were eliminated.No computer No computer division but . . .division but . . .We still have aWe still have acompany president.company president.11-6Traceable and Common CostsFixedCostsTraceableCommonDont allocatecommon costs to segments.Thesegment margin, which is computed by subtracting the traceable fixed costs of a segment from its contribution margin, is the best gauge of the long-run profitability of a segment.11-7Segment Reporting for Financial AccountingThe Accounting Standards Boardnow requires that companies in Canada include segmented financial datain their annual reports.1.Companies must report segmented results to shareholders using the same methodsthat are used for internal segmented reports.2.Since the contribution approach to segment reporting does not comply with GAAP, it is likely that some managers will choose to construct their segmented financial statements using the absorption approach to comply with GAAP.11-8Income StatementHaglund's LakeshoreBarRestaurantSales800,000$ 100,000$ 700,000$ Variable costs310,00060,000250,000CM490,00040,000450,000Traceable FC246,00026,000220,000Segment margin244,00014,000$ 230,000$ Common costs200,000Profit44,000$ Quick Check Assume that Hagland's Lakeshore prepared its segmented income statement as shown.11-9Income StatementHaglund's LakeshoreBarRestaurantSales800,000$ 100,000$ 700,000$ Variable costs310,00060,000250,000CM490,00040,000450,000Traceable FC246,00026,000220,000Segment margin244,00014,000230,000Common costs200,00020,000180,000Profit44,000$ (6,000)$ 50,000$ Should the bar be eliminated?11-10...
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Chapter 11 Student Version - 11-1MANAGERIAL...

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