Fixed costs that are traceable to a segment may become common if the segment is divided into smaller units.

Question

Quizplus · Accepted Answer

If a segment is divided into smaller units, the fixed costs that were previously traceable to the overall segment may need to be allocated across the smaller units, making them common costs. This is because the smaller units may not have sufficient activity or revenue to justify the full allocation of the fixed costs that were previously traceable to the overall segment.

Fixed Costs That Are Traceable to a Segment May Become