Answer (D) is correct . The performance of the segment is judged on all costs assigned to it, but the segment manager is only judged on costs that he or she can control. Some fixed costs are imposed on segments by the organization’s upper management, and they are thus beyond the segment manager’s control. These direct costs controllable by others make up the difference between segment manager performance and segment performance.
Answer (A) is incorrect because Unallocated fixed costs do not affect either performance measure.
Answer (B) is incorrect because Direct variable costs affect both performance measures.
Answer (C) is incorrect because Direct fixed costs controllable by the segment manager affect both performance measures.
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