Question

Explain about common and traceable fixed cost?

Answer 1

Fixed costs are the costs which remain fixed over a period of time and are not at all affected by the level of production or any other activity taking place.

Fixed costs can be traceable or untraceable.

Traceable fixed costs are those fixed costs which can be clearly identified with a specific product or service i.e. if those products/services are continued in the business, the fixed cost will continue to be incurred at the same level. However, if the product/service is discontinued, these fixed costs can be avoided. Some examples of traceable fixed costs can be Salaries of line managers of particular products, advertising cost related to a particular product.

The common fixed costs on the other hand are those fixed costs which cannot be identified with any particular product/service. These are generally considered at an entity-level rather than the respective products. Some examples of these are the General overheads, Common corporate cost.