One of the dangers of allocating common fixed costs to a product line is that such allocations can make the line appear less profitable than it really is.

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Allocating common fixed costs to a product line can result in the line appearing less profitable than it really is because these costs are shared across multiple products or business units. The allocation process may not accurately reflect the actual usage or benefit of the common costs by each product line, resulting in distorted profitability figures.

One of the Dangers of Allocating Common Fixed Costs to a Product