What are "common" fixed costs not allocated to segments? Can you think of any segments that...

What are "common" fixed costs not allocated to segments? Can you think of any segments that have been eliminated from companies that you are familiar with (products, etc.). I was shopping for a small truck recently and noticed that Mazda had eliminated economy trucks from their product line. Their small truck product line must have had a negative 'segment margin".

Expert Solution

What are "common" fixed costs not allocated to segments?

Segment reporting can done on basis of the following

· Departments

· Operations

· Sales territories

· Divisions

· Product lines

In segment repotting the revenues, costs are complied to analyse to segment margins. By using contribution margin

In formula it can be written as

Segment margin = segment revenue – segment variable cost – traceable fixed cost

The common fixed cost are not allocated to segment reporting for calculation of segment profit

The examples of common fixed cost not allocated to segments

· The salaries of CEO

· The salary of legal counsel of the company

· The rent of corporate office

· Deprecation of office equipments used by corporate office

· Depreciation of common machines used by all divisions

· Expenses on corporate image advertising

ekkarill92 answered 1 year ago

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