Which of the following equations is used to calculate the segment margin? a. Segment margin = Segment's marginal sales + Step cost + Contribution margin b. Segment margin = Segment's desired profit profit - Target cost + Contribution margin c. Segment margin = Segment's sales revenue - Target cost + Contribution margin d. Segment margin = Segment's sales revenue - Direct fixed costs - Variable costs e. Segment margin = Segment's sales revenue + Direct fixed costs + Contribution margin

D) Segment margin = Segment's sales revenue - Direct fixed costs - Variable costs

Explanation:

Segment margin is used to measure the profitability of an individual product line or an individual geographic division. Its formula is: segment margin = segment revenues - segment costs (both variable and fixed).

It is basically used for internal decision making purposes, since you can compare the different segment margins of the company's different product lines or geographic divisions.

If you want to compare product lines or divisions that have significantly different sizes, you can also use the segment margin ratio:

segment market ratio = (segment revenue - segment costs) / segment revenues

d. Segment margin = Segment's sales revenue - Direct fixed costs - Variable costs

Explanation:

The segment margin is given by: Segment margin = Segment's sales revenue - Direct fixed costs - Variable costs