Question

WV Construction has two divisions: Remodeling and New Home Construction. Each division has an on-site supervisor who is paid a salary of $106,000 annually and one salaried estimator who is paid $58,000 annually. The corporate office has two office administrative assistants who are paid salaries of $62,000 and $43,000 annually. The president's salary is $171,000. How much of these salaries are common fixed expenses?

Answer 1

Fixed costs can be classified as Direct Fixed Costs anc Common Fixed costs.

Direct Fixed costs are traceable to the product or divisions. It may some times be eliminated if the related product or division discontinue.

Common Fixed costs are those which cannot be traceable to the product or division and hence allocated to the product or division. These costs will continue even if the segment is discontinued.

In the given scenario, the salary of on-site supervisor and estimator is direct fixed costs as it is directly related to the divisions.

Thus, the common fixed expenses are as follows in the table attached: