Management and Organizational Studies 3370A/B Chapter Notes - Chapter 11: Sales Territory, Fixed Cost, Activity-Based Costing

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 3370A/B
• Professor: Bill Dawson

Document Summary

Service centre: corporations could segment their business by customer channel, geographic regions, individual stores, nature of merchandise, brand name, etc. Variable and fixed: according to whether the costs are directly traceable to the segments involved. The landing fee paid to land an airplane at an airport is traceable to the particular flight, but it is not traceable to first-class, business-class and economy-class passengers. They may not trace fixed expenses to segments even when it is feasible to do so. They may use inappropriate allocation bases to allocated traceable fixed expenses to segments: failure to trace costs directly, costs that can be traced directly to a specific company segment should be charged directly to that segment. Failure to trace these costs directly results in these costs being placed in a companywide overhead pool- can result in costs being incorrectly allocated to other segments. This practice may make a profitable business segment appear to be unprofitable.