Snead Inc.currently produces 120,000 units at a cost of $400,000.Next year Snead Inc.expects to produce 145,000 units.Snead's relevant range is 100,000 to 150,000 units.If the cost is fixed and 145,000 units are produced, the fixed cost _____.
A)will stay the same
B)will increase to $460,000
C)will decrease
D)will be indeterminate

Question

Quizplus · Accepted Answer

If the cost is fixed, it means that it does not change with the level of production. Therefore, producing 145,000 units within the relevant range of 100,000 to 150,000 units will not impact the fixed cost. It will remain the same at $400,000.

Snead IncCurrently Produces 120,000 Units at a Cost of $400,000