Which of the following statements is true?
A) A reduction the cost per unit will result in improved profitability measures
B) A reduction in cost per unit can often be achieved by reducing the number of units produced.
C) A reduction in cost per unit must also reduce total costs
D) Using cost per unit as a measure is an effective way to prevent managers from misrepresenting performance figures
E) None of the above is true

Question

Quizplus · Accepted Answer

None of the statements A through D are universally true. A reduction in cost per unit can improve profitability, but not if it leads to a decrease in quality that affects sales negatively. Reducing the number of units produced often increases the cost per unit due to fixed costs spread over fewer units. A reduction in cost per unit does not necessarily reduce total costs if the volume of production or other costs increase. Using cost per unit as a measure does not inherently prevent managers from misrepresenting performance figures, as they might still find ways to manipulate other aspects of financial reporting.

Which of the Following Statements Is True