Choose any company. Break that company into two separate segments. Think of three common fixed costs...

Choose any company. Break that company into two separate segments. Think of three common fixed costs of the company and three traceable fixed costs to each segment.

Expert Solution

Solution : For a Manufacturing Automobile Company

While preparing the income statments for segments , the fixed costs are primarily categorised into two parts i.e traceable fixed costs and common fixed costs

Traceable Fixed cost : These cost arise due to the existance of a particular segment. Hence, if the segment were eliminated, the fixed cost would not appear.

1. Salary of the automobile design manager is the traceable fixed cost of the design segment of the automobile Co.

2. Workers Group insurance policy premium payments are a traceable fixed cost of the Manufacturing segment.

3. Factory rental lease payments are a tracebale fixed costs for the manufacturing segment.

Common Fixed costs : The costs which supports the operations of more than one segment. It is unaffected on the counts of the segments and is occuring due to the overall operating activities.

Examples

1. Remuneration/salary of the general manager who controls all the segments

2. Real estate taxes for the automobile company.

3.Salary of Cheif Financial officer who is responsible for the financial affairs of the automobile company.

ekkarill92 answered 1 year ago

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