Only unit costs computed using the same denominator level of production should be compared.

Question

Quizplus · Accepted Answer

Unit costs are computed by dividing the total cost of production by the number of units produced. To compare unit costs accurately, it is essential to use the same denominator level of production. For example, comparing unit costs of a product produced at 10,000 units with a product produced at 5,000 units would not give accurate results. Hence, it is essential to compare unit costs computed using the same denominator level of production.

Only Unit Costs Computed Using the Same Denominator Level of Production