Question

Required information[The following information applies to the questions displayed below.]Patterson's Department Store prepares monthly income statements by sales departments. These income statements are organized to show contribution margin, performance margin, and responsibility margin for each sales department, as well as operating income for the store as a whole.Many companies view performance margin as a more useful tool than responsibility margin for evaluating segment managers. This is because:

a. Managers have no control over traceable fixed costs.

b. Performance margin is not affected by the size of the department.

c. Performance margin indicates the change in operating income that would result from closing the department.

d. Performance margin includes only those revenue and costs under the manager's direct control.

Answer 1

Answer. C

a. Managers have no control over traceable fixed costs. - Not talking about the fixed cost.

b. Performance margin is not affected by the size of the department. - The performance margin affected by size of the department because of margin calculates by dividing the operating income by net sale during the period.

c. Performance margin indicates the change in operating income that would result from closing the department. - Yes, the performance margin indicates the change in operating Income because of measure the amount of profit realized from a business's operations after deducting the operating expense such as wages and cos of goods sold.

d. Performance margin includes only those revenue and costs under the manager's direct control.- The manager doesn't control revenue and cost.