Question

explain why corporate sustaining costs are not allocated directly to customers.

Answer 1

Corporate sustaining costs are those costs that cannot be identified with any product.

They are incurred for the overall sustenance of the company and include costs like the salary and other benefits paid to the CEO, cost of social responsibility schemes, and so on.

Such costs cannot be traced to any product, service or customer as there is no way the benefits derived by the different products or services can be related to such expenditure. If any allocation is done it can be only arbitrary and would trigger incorrect decisions.