Question

In what situation common fixed expenses become direct fixed expenses and give the example ?

Answer 1

Common Fixed expenses of one segment of a business can become the direct fixed expense of another.

We can understand this with an example of airlines. Suppose an airline operates a particular aeroplane from destination A to B and has two classes of seats, business and economy. Now fixed expense such as landing charges will be a common fixed expense when we look into the segment-wise cost of both the classes of the seats. However, this landing charge will become a direct fixed expense when we look to evaluate the costs of the particular flight.