Cord Corporation discloses operating segment information for its two reportable
ID: 2437063 • Letter: C
Question
Cord Corporation discloses operating segment information for its two reportable segments. Data for the year are available as follows:
Segment E
Segment W
Sales
$750,000
$250,000
Traceable operating expenses
$325,000
$130,000
Additional expenses are as follows:
Indirect operating expenses
$120,000
General corporate expenses
$100,000
The calculation of the measure of segment profit or loss reviewed by Cord’s chief operating decision maker includes traceable operating costs and indirect operating expenses, but not general corporate expenses. Indirect operating expenses are allocated based on the ratio of each segment’s sales to total reportable segment sales. The annual operating profit for Segment E was
a. $260,000
b. $395,000
c. $425,000
d. $335,000
Segment E
Segment W
Sales
$750,000
$250,000
Traceable operating expenses
$325,000
$130,000
Additional expenses are as follows:
Indirect operating expenses
$120,000
General corporate expenses
$100,000
Explanation / Answer
Based on Cord's chief operating decision maker,traeable operating costs and indirect operating expenses are included while calculating the operating profit
Indirect operating costs for Segment E = $120000*$750000/($750000+$250000)
= $90000
Segment E Operating Income
Sales $750000
Less Traceable operating expenses ($325000)
Less Indirect operating expenses ($90000)
Annual operating Profit for Segment E $335000
Option D is correct
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