County Cable Services Inc. is organized in three segments: Metro, Suburban, and Outlying. Data for the company and for these segments follow.
Variable costs as a percentage of service revenue are: Metro, 20%; Suburban, 18.75%; and Outlying, 25%.
Required:
A. Complete the segmented income statement for County Cable.
B. Evaluate the three segment managers for consideration of a pay raise. Base the managers' performance on (1) absolute dollars of the appropriate profit measure, and (2) the appropriate profit measure as a percentage of service revenue. What causes any difference in rankings between the two approaches?

Question

County Cable Services Inc. is organized in three segments: Metro, Suburban, and Outlying. Data for the company and for these segments follow.  
Variable costs as a percentage of service revenue are: Metro, 20%; Suburban, 18.75%; and Outlying, 25%.
Required: 
A. Complete the segmented income statement for County Cable.
B. Evaluate the three segment managers for consideration of a pay raise. Base the managers' performance on (1) absolute dollars of the appropriate profit measure, and (2) the appropriate profit measure as a percentage of service revenue. What causes any difference in rankings between the two approaches?

Quizplus · Accepted Answer

The Answer of County Cable Services Inc. is organized in three segments: Metro, Suburban, and Outlying. Data for the company and for these segments follow.  
Variable costs as a percentage of service revenue are: Metro, 20%; Suburban, 18.75%; and Outlying, 25%.
Required: 
A. Complete the segmented income statement for County Cable.
B. Evaluate the three segment managers for consideration of a pay raise. Base the managers' performance on (1) absolute dollars of the appropriate profit measure, and (2) the appropriate profit measure as a percentage of service revenue. What causes any difference in rankings between the two approaches?