In deciding whether to add or delete a product,the insurance expense associated with the custom-built equipment used to produce the product is an ________ cost.Assume the equipment will be sold if the company discontinues the product.
A) avoidable fixed
B) avoidable variable
C) unavoidable fixed
D) unavoidable variable

Question

Quizplus · Accepted Answer

The insurance expense associated with the custom-built equipment is an avoidable cost because it is directly tied to the production of the specific product. If the company discontinues the product, they can sell the equipment and avoid the insurance expense. However, since the equipment is custom-built, it is a fixed cost as the company cannot simply adjust the production capacity by adding or removing the equipment. Therefore, the best choice is A) avoidable fixed.

In Deciding Whether to Add or Delete a Product,the Insurance