Question

Vehicle Corporation is organized into four operating segments. The internal reporting system generated the following segment information:

	Revenues from Outsiders				Intersegment Transfers				Operating Expenses
Autos	$	4,025,000			$	125,000			$	3,625,000
Trucks		3,525,000				225,000				4,025,000
SUVs		2,625,000				0				2,025,000
Motorcycles		925,000				75,000				1,045,000

The company incurred additional operating expenses (of a general nature) of $1,225,000.

1. What is the profit or loss of each of these segments?

2. Perform the profit or loss test to determine which of these segments is separately reportable.

Answer 1

Solution

1.

	Profit	loss
Autos	$525000(4025000+125000-3625000)
Trucks		$275000(3525000+25000-4025000)
SUVs	$600000(2625000+0-2025000)
Motorcycle		$45000(925000+75000-1045000)
Total	$1125000	$320000

2. Reportable segments are those segments where profit or loss is 10% more of total profit or loss whichever is higher

Which is $112500 (10% of total profit ($1125000))

Therefore auto, trucks, SUVs Profit or loss is more than $112500 so auto, trucks, and SUVs segments are separately reportable.