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Segment Reporting

A segment in an organization is simply a part of the organization or an activity that managers would like financial information from in order to make decisions and evaluate performance. Examples of segments include divisions of a company, sales territories, individual stores, service centres, manufacturing plants, marketing departments, individual customers and product lines.

Areas of Responsibility

In decentralized organizations, basic business segments are usually classified as either a cost, profit or investment center. Under responsibility accounting, managers are held responsible for those items of revenues and cost – and only those items – over which the manager can exert significant influence. The managers are held responsible for differences between budgeted and actual results.

Cost centers: Business segments where managers have decision-making authority over inputs, or costs.

Profit centers: Business segments where managers have decision-making authority on inputs and sales and, therefore, are responsible for costs, revenues and profits.

Investment centers: Business segments where managers have decision-making authority over the short- and long-term use of capital. As a result, business managers are evaluated on their use of capital, or return on investment (ROI). 

Treatment of Costs

Segmented income statements are prepared using a contribution format, as this method separates fixed from variable costs and enables the calculation of contribution margin. The contribution margin is especially useful in decisions involving temporary use of capacity, such as special orders.

Common costs are not assigned to segments. For example, service department costs and organization-sustaining costs are not assigned to operating departments, nor are head office costs assigned to an individual store. Fixed costs that are traceable to that segment (costs that would not be incurred without the segment, such as a managers salary) are included to calculate segment margin.

Common costs: Fixed costs that support the operations of more than one segment. Common costs cannot be eliminated in whole or in part by the elimination of one segment.

Traceable fixed costs: Fixed costs that support the operations of one segment. If the segment is eliminated, the fixed cost is eliminated. Traceable fixed costs of one segment may be a common fixed cost of another segment.

Computing Cash Flow from Operating Activities

1. Using the indirect method, calculate the amount of net cash flows from operating activities from the following data, show your work. 2. Why is the statement of cash flows useful to a manager? Net Income for the year 100,000 Beginning Accounts Payable $6,000 Beginning Accounts Receivable 10,000 E

Segment interim reporting

Ridge company is in the process of determining its reportable segments for the year ended December 31 2012. As the person responsible for determining this information, you gather the following information. Operating Sales to external Intersegment Sales Segment Segment Segments Customers and

Question on Segment Reporting

The question is to explain why it will potentially assist users if segment information is contained in a financial report. Approx 700 words. I have broken the question down to: 1.Explaining what segment reporting is 2.The standards required for segment reporting 3.Why segment reporting is relevant to financial users 4.

Chapter 8- Segment and Interim Reporting

Fireside Corporation is organized into four segments. The internal reporting system generated the following segment information: Revenues from outsiders Intersegment Transfers Operating Expenses Cards 1,200,000 100,000 900,000 Calendars 900,000 200,000 1,350,000 Clothing 1,000,000 0 700,000 Books 800,000 50,000 77

Important information about Dropping or Retaining a Segment

Please see attached file. Boyle's Home Center, a retailing company, has two departments, Bath and Kitchen. The company's most recent monthly contribution format income statement follows: Department Total Bath Kitchen Sales $ 5,000,000 $ 1,000,000 $ 4,000,000 Variable expenses 1,900,000 300,000 1,600,000 C

Jackson County Senior Services: Dropping or Retaining a Segment

Please see the attached file. Jackson County Senior Services is a nonprofit organization devoted to providing essential services to seniors who live in their own homes within the Jackson County area. Three services are provided for seniors?home nursing, meals on wheels, and housekeeping. In the home nursing program, nurses vi

Segment Reporting and Analysis

The following is Tennis Today's financial statement for the year ending December 31, 2006, in total and by division: Total Division A Divsion B Assets Cash $ 46,000 $ 10,000 $ 36,000 Accounts Receivable

Segment and Interim reporting

Slatter Corp operates primarily in the United States. However, a few years ago, it opened a plan in Spain to produce merchandise to sell there. This foreign operation has been so successful that during the past 24 months the company started a manufacturing plant in Italy and another in Greece. Financial information for eac


DOES IBM REALLY HAVE ONLY ONE INDUSTRY SEGMENT? Not all corporations have readily embraced segment reporting. All disclosure has a cost; gathering and monitoring information for each segment are not cheap. In addition, some companies fear that such data could be useful to their competitors. One solution is to define the compa

8-22 Segment and interim reporting

22. Quatro Corp. is engaged solely in manufacturing operations. The following data pertain to the operating segments for the current year. Operating Total Segment Revenues Profit Assets at 12/31 A . . . . . . . . . . . . . . . . . . . . . $10,000

Segment margin

The Rialto Company's income statement for May is given below: Total Division L Division M Sales 300,000 165,000 135,000 Variable expenses 153,000 99,000 54,000 Contribution margin 147,000 66,000 81,000 Traceable fixed expenses 97,000 45,000 52,000 Segment margin 50,000 21,000 29,000 Com