Common costs are allocated to each segment of a business to determine the segment's contribution margin.

Name: Common costs are allocated to each segment of a business to determine the segment's contribution margin.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Common costs are not allocated to segments when determining the segment's contribution margin; instead, only direct costs and variable costs are considered. Contribution margin is calculated to assess the profitability of individual segments without the allocation of fixed common costs.

Common Costs Are Allocated to Each Segment of a Business