Question

Internet Writing Assignment:

Perform an Internet search using one or more of the following terms: traceable fixed costs,

common fixed costs, and/or segment margin. Locate an article (less than one year old) from the

results of your search. (Make sure that you do not select an instructor’s lecture notes or a class

assignment from the results of your search.) After reading the article, write two or three

paragraphs that summarize and comment on the article. (Your paper should provide the

appropriate citation(s). If necessary, you may wish to refer to the following website, which

includes information about citations: http://www.cod.edu/library/research/citenet.htm.)

Answer 1

Traceable Fixed Cost:

A traceable fixed cost is a fixed cost that is incurred because of the existence of a segment. If the segment had never existed, the fixed cost would have not been incurred; and if the segment were eliminated, the fixed cost would disappear.

Example:

• The salary of the Fritos product manager at Pepsi CO. is traceable fixed cost of the Fritos business segment of Pepsi Co.
• The liability insurance at Disney World is a traceable fixed cost of the Disney Worldbusiness segment of the Disney Corporation.

Common Fixed Cost:   

A common fixed cost is a fixed common cost that supports the operations of more than one segment, but is not traceable in whole or in part to any one segment. Even if a segment were entirely eliminated, there would be no change in true common fixed cost.

Example:

• The salary of general manager who controls all the segments. The salary of CEO at general motors is also an example of common fixed cost. No single segment can be regarded as the sole reason of this cost.
• The salary of receptionist at an office shared by a number of doctors is a common fixed cost of the doctors. The cost is traceable to the office, but not to any one of the doctors individually.

Segment Marigin:

Segment margin is the amount of net profit or net loss generated by a portion of a business. It is useful to track segment margins (especially on a trend line) in order to learn which parts of a total business are performing better or worse than average. The analysis is also useful for determining where to invest additional funds in a business.

Example of the segment:

• Individual store locations
• A geographic region
• A product line
• A sales territory