Which of the following statements regarding costs and decision making is correct?
A) Fixed costs must be considered only on a per-unit basis.
B) Per-unit fixed cost amounts are valid only for make-or-buy decisions.
C) Per-unit fixed costs can be misleading because such amounts appear to behave as variable costs when, in actuality, the amounts are related to fixed expenditures.
D) Sunk costs can be misleading in make-or-buy decisions because these amounts appear to be relevant differential costs.
E) Opportunity costs should be ignored when evaluating decision alternatives.

Question

Quizplus · Accepted Answer

Fixed costs are constant in total, but when expressed on a per-unit basis, they decrease as production volume increases. This can misleadingly suggest that they behave like variable costs, which change with the level of output, even though fixed costs do not actually vary with production volume.

Which of the Following Statements Regarding Costs and Decision Making