Common fixed costs should not be charged to the individual segments when preparing a segmented income statement.

Question

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Common fixed costs are costs that do not vary with changes in the level of activity in a company's segments. Therefore, they should not be allocated to individual segments when preparing a segmented income statement. Instead, these costs should be treated as an operating expense of the company as a whole. Only variable costs that vary with changes in the level of activity should be allocated to individual segments.

Common Fixed Costs Should Not Be Charged to the Individual