A fixed cost is relevant if it is
A)uncontrollable.
B)avoidable.
C)sunk.
D)a product cost.

Question

Quizplus · Accepted Answer

Fixed costs can be avoidable or unavoidable. If a fixed cost can be avoided or eliminated by taking a different course of action, it is relevant. Avoidable fixed costs can be controlled or managed by management decisions, and they should be considered when making decisions. Unavoidable fixed costs, on the other hand, cannot be controlled or eliminated, and they are not relevant when making decisions. Sunk costs are past costs that have already been incurred and cannot be recovered, they are not relevant when making decisions. Product costs include direct materials, direct labor, and manufacturing overhead, they are not necessarily fixed costs, and they are relevant for inventory valuation and cost of goods sold, but not for decision-making purposes.

A Fixed Cost Is Relevant If It Is