Question

Which of the following is a true statement pertaining to segment income statements?

1) Only present the individual segments' net income, not total company net income.
2) Only include variable costs.
3) Do not present a segment margin.
4) Do not include arbitrarily allocated common fixed expenses when calculating segment margin.
5) All of these.

Answer 1

The true statement about segment income statements is that they do not include arbitrarily allocated common fixed expenses when calculating segment margin. They can present all relevant costs and may also show segment margin and total company net income.

Step-by-step explanation:

The true statement pertaining to segment income statements is that they do not include arbitrarily allocated common fixed expenses when calculating segment margin. Segment income statements often provide detailed financial information about the different parts of a company. These statements help in analyzing the profitability of each segment on its own merits, excluding expenses that cannot be directly attributed to them. Including only directly attributable costs ensures that the segment margin accurately reflects the segment's performance.

Moreover, segment income statements can present any relevant costs, not only variable costs, as they are meant to illustrate the performance of individual business segments. They can also show segment margin, which is a key figure indicating the profitability of a segment after accounting for the costs that can be directly attributable to it. Furthermore, these statements may also include the total company net income, giving a complete view of a company's financial health while still detailing individual segment performance.