BADM*2020 Chapter Notes -Income Statement, New Current, Earnings Before Interest And Taxes
Document Summary
Initially most companies produced one product or performed one service. The standard income statement was sufficient for both external reporting and internal decision making. In 1904 dupont was formed and it had many products. Still had to produce the standard income statement for reporting purposes, but it was insufficient for internal decision making. Which products were making money: solutions is segmented reporting. A segment is any part or activity of an organization about which a manager seeks cost or revenue data. Examples of segments include sales territories, products, divisions of a company, individual salespersons, individual customers, etc: various types of segmented divisions i. ii. iii. iv. 5: danger of allocating common costs, common vs. traceable see above example, mixed signals to division managers. The manager of division b sees that she can reduce division costs by , but it will result in a decrease of ,000 in sales. Allocated costs are still applied based on sales.
