Answer :
One of the great dangers in allocating common fixed costs is that such allocations can make a product line look less profitable than it really is. Fixed costs are expenses that remain constant regardless of whether sales or production volumes rise or fall.
Fixed costs are therefore regarded as indirect costs. Rent and leasing charges, salary, energy prices, expenses, insurance, and loan repayments are a few examples of fixed costs. There are some taxes that are fixed costs as well, such as company licences. However, if the workforce grows or shrinks, so can the wages given to employees. As a result, it is not regarded as a fixed expense.
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