Common fixed cost
A common fixed cost is shared across multiple segments and would continue even if one segment were eliminated — such as head-office rent or the chief executive's salary — making it irrelevant to individual segment viability decisions.
FrameworkSegment reporting
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Segment A contributes a margin of €150,000 and Segment B a further €90,000, for a combined €240,000. Head-office costs of €180,000 — salaries, IT, central rent — benefit both segments and would remain even if one closed, so they are deducted only once, at the company level, rather than split between segments. The result is a company profit of €60,000.
Where it fits
TopicResponsibility Accounting & DecentralisationCoreSubjectManagerial AccountingCoreTopicDivisional Performance MeasurementCore