What is the difference between a traceable and a common fixed cost?

Expert Solution

Common fixed expense

These are fixed expenses which are linked to any specific segment or operation or line of business. Common fixed expenses are mainly incurred in diversified companies. These are expenses to meet the needs of the company as a whole and cannot be directly linked to any segment or line of business within this company. A simple expample would be the rent for headquaters of this company with diversified segments. The headquarters rent cannot be linked to any of the single segment or rather easily apportioned to any segment.

Traceable fixed expense

Traceable fixed expenses on the other hand can be linked to a specific segment or operation or line of business, or atleast apportioned to them. That is if the above segment were not to exist, traceable fixed expense will not have to be incurred. On the same note of example given above, if the headquarters were to have a single floor designated for sale of the company's apparel division, rent of this floor can easily be linked to the apparel segment of the company. So rent of that floor is a traceable fixed expense.

ekkarill92 answered 2 years ago

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