Pacheco Industries is comprised of four separate profit centers, which are distributed throughout the United States. Relevant data for each profit center are summarized for

You determine that intersegment sales are distributed as follows:
Common costs of $2,400,000 were incurred during 2008. Management believes that total labor hours worked during the year provides a reasonable basis for allocation of these costs. In each situation described below, an operating segment is comprised of different combinations of profit centers. Thus, the “AB” operating segment consists of profit centers “A” and “B.” Consider the following five combinations of operating segments:
1. AB, CD
2. AB, C, D
3. A, B, CD
4. A, B, C, D
5. A, BD, C

A. For each combination listed, determine which operating segments are reportable segments. Apply all required tests and indicate the results of each test separately.
B. For each combination given, indicate if the reportable segments determined in (A) above collectively represent a “substantial portion” of Pacheco Industries’ total operations, applying the 75% revenuetest.

  • CreatedMarch 13, 2015
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