Question

Allocating common fixed expenses to business segments: Multiple Choice may cause managers to erroneously keep business segments that should be dropped. ensures that all costs are covered. may cause managers to erroneously discontinue business segments. helps managers make good decisions.

Answer 1

Answer:

ensures that all costs are covered

Explanation:

Common fixed expenses is support the operation of many segments. It is not visible in whole segment or in the part of any segment.

Allocating common fixed expenses to business segments may reason the managers to wrongly terminated business segments because it’s artificially increases each segment of break even point. Even after discontinuation of common fixed expenses, it will happen continuously.

So According to the analysis, option (C) is correct.