Companies often allocate common fixed costs among segments.For example, common fixed corporate costs are often allocated to divisions and appear as part of the divisional performance reports.
Required:
What dangers are there in allocating common fixed costs to segments when involved in a decision to possibly drop a segment such as a product or a division?

A segment such as a product or a division may show a net loss only because of the allocated common fixed cost.However, if the segment is dropped, the common fixed expense will continue.A segment should be dropped only if its contribution margin does not cover its own avoidable fixed costs.And even in cases where a segment does not cover its own costs, it may be beneficial to retain the segment if it has positive effects on other segments.For example, a "losing" product may be important in luring customers into a store where they will buy other products.