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Non-traceable costs, fixed cost

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1. If non-traceable costs are not allocated to the various operating units within an organization, who ends up paying these costs?

2. Some firms have a lot of fixed costs and few variable costs, while other firms are configured the other way around. What affect do you think the existence of a high proportion of fixed costs has on the desirability of using ABC methods?

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Answer 1: If non-traceable costs are not allocated to the various operating units within an organization, then the business (as a whole) ends up paying those costs. All costs do not have to be allocated to any operating unit. For example the CEO's ...

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