Which of the following statements is true regarding the allocation of a company's indirect fixed costs?
A) Indirect fixed costs should always be traced to a particular segment.
B) If the indirect fixed cost would go away should a particular segment be eliminated, then the indirect fixed cost should be traced to that particular segment.
C) Indirect fixed costs should never be allocated to a particular segment.
D) Indirect fixed costs should not benefit more than one particular segment.

Question

Quizplus · Accepted Answer

Indirect fixed costs should be allocated to a particular segment if they would go away if that segment were eliminated. This is because those costs are uniquely tied to that segment and should not be allocated to other segments that do not benefit from them. Allocations of indirect fixed costs should be based on the cause-and-effect relationship between the cost and the segment.

Which of the Following Statements Is True Regarding the Allocation