Question

Assume you are preparing income statements for different segments. Which of the following is not a...

Assume you are preparing income statements for different segments. Which of the following is not a fixed cost controllable by a segment manager?

Segment manager's salary

Advertising costs in local paper to promote segment

Salespersons' salaries for segment

Training costs for new employees at segment
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Answer #1

Answer is Training costs for new employees at segment.

Fixed costs are controllable by segment when they are directly incurred for a particular segment. In the given case segment manager’s salary, advertising salary and salespersons’ salary are directly controllable by the segment and can be avoided. The training of new employees costs are uncontrollable by segment since it is inevitable it will be incurred and have to be absorbed by the segment. Hence the answer is fourth option.

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