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Segment Reporting
09-01-2009, 06:38 PM,
#1
Segment Reporting
<font color="blue"><b>Segment</b></font id="blue">
Any part or activity of an organization about which the managers seeks cost, revenue, or profit data.

<font color="blue"><b>Segment Reporting</b></font id="blue">

An income statement or other report in an organization in which data are divided according to product lines, divisions, territories, or similar organizational segments.

<font color="blue"><b>Segment Margin</b></font id="blue">

The amount computed by deducting the traceable fixed costs of a segment from the segment's contribution margin. It represents the margin available after a segment has covered all of its own traceable costs.

<b>The segment margin is the best gauge of the long-run profitability of a segment.</b>
<font color="blue"><b>Traceable Fixed Cost</b></font id="blue">

A fixed cost that is incurred because of the existence of a particular business segment.

<font color="blue"><b>Common Fixed Cost</b></font id="blue">

A fixed cost that supports more than one business segment, but is not traceable in whole or in part to any one of the business segments.

<font color="blue">Identifying Traceable Fixed Costs</font id="blue">

The distinction between traceable and common fixed costs is crucial in segment reporting, since traceable fixed costs are charged to the segments, whereas common fixed costs should not be charged to segments.

<font color="blue"><b>Traceable Costs can Become Common Costs</b></font id="blue">

Fixed costs that are traceable to one segment may be a common cost of another segment.














<font color="blue"><b>Example</b></font id="blue">

Total CD DVD
% $ % $ % $
sales 100 750000 100 300000 100 450000
less variable cost 58 435000 40 120000 70 315000
contribution margin 42 315000 60 180000 30 135000
less traceable fixed cost 24.4 183000 46 138000 10 45000
segment margin 17.6 132000 14 42000 20 90000
less common fixed cost 14 105000
net profit 3.6 27000


If we divide DVD into two segments then



segments
DVD A B
sales $450000 $150000 $300000
less variable cost 195000 45000 150000
contribution margin 255000 105000 150000
less traceable fixed cost 168000 78000 90000
segment margin 87000 27000 60000
less common fixed cost 80000
net operating income 7000

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09-03-2009, 04:47 PM,
#2
 
good info mr.shahid
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09-09-2009, 04:58 PM,
#3
 
Thanks Mr.Tariq
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09-12-2009, 02:52 PM,
#4
 
good work!
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