High School

We appreciate your visit to How is segment margin calculated Select an answer 1 Revenue plus variable cost plus direct fixed cost2 Revenue minus variable cost minus direct fixed cost3. This page offers clear insights and highlights the essential aspects of the topic. Our goal is to provide a helpful and engaging learning experience. Explore the content and find the answers you need!

How is segment margin calculated? Select an answer:
1. Revenue plus variable cost plus direct fixed cost
2. Revenue minus variable cost minus direct fixed cost
3. Revenue plus fixed cost minus variable cost
4. Revenue minus variable cost minus indirect materials cost

Answer :

To determine the segment margin, a business evaluates the financial performance of a separate segment of the organization. The segment margin helps assess the profitability of different parts of the business and is instrumental for managerial decisions.

The segment margin is calculated with the formula:

[tex]\text{Segment Margin} = \text{Revenue} - \text{Variable Costs} - \text{Direct Fixed Costs}[/tex]

Let's examine each of these components:

  1. Revenue: This is the total income generated by the segment from sales of goods or services.

  2. Variable Costs: These are expenses that vary directly with the level of production or sales volume, such as raw materials and direct labor.

  3. Direct Fixed Costs: These are fixed costs that can be directly attributed to the segment, like segment-specific managerial salaries or equipment.

Using this calculation, the correct multiple-choice answer is Option 2: Revenue minus variable cost minus direct fixed cost.

Understanding segment margin allows businesses to analyze profitability at a more detailed level, helping to make informed decisions about resource allocation, cost control, and strategic planning.

Thanks for taking the time to read How is segment margin calculated Select an answer 1 Revenue plus variable cost plus direct fixed cost2 Revenue minus variable cost minus direct fixed cost3. We hope the insights shared have been valuable and enhanced your understanding of the topic. Don�t hesitate to browse our website for more informative and engaging content!

Rewritten by : Barada