Traceable fixed cost
A traceable fixed cost is directly attributable to a specific segment or product line and would disappear if that segment closed; it is deducted from segment contribution to calculate segment margin and is relevant to add-or-drop decisions.
FrameworkSegment reporting
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A segment earning €500,000 in revenue, less €300,000 of variable costs and €120,000 of traceable fixed costs, leaves an €80,000 segment margin. Because these fixed costs exist only to support this segment, they would disappear if it closed, unlike common costs, which persist regardless and sit below this line.
Where it fits
TopicResponsibility Accounting & DecentralisationCoreSubjectManagerial AccountingCoreTopicDivisional Performance MeasurementCore
Check yourself
PracticeCORE
A company operates three product divisions: Sports, Home, and Office. Which of the following costs is correctly classified as a traceable fixed cost of the Sports division?
Select an answer to check your understanding.