For the segment manager to be properly evaluated,common costs should NOT be allocated to the various segments,even if an arbitrary allocation is required.

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Quizplus · Accepted Answer

Common costs are costs that cannot be directly traced to a specific segment and include expenses such as rent, utilities, and salaries of top management. These costs should not be allocated to the segments as it can result in distortion of the true profitability of each segment. Instead, these costs should be treated as direct expenses of the company as a whole and evaluated separately. Therefore, it is true that common costs should not be allocated to the various segments, even if an arbitrary allocation is required.

For the Segment Manager to Be Properly Evaluated,common Costs Should