Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 1

Fixed costs are often defined as “fixed over the short run.” Does this mean that they are notfixed over the long run? Why or why not?

Step 1 of 2

Fixed Costs:

Fixed costs remain constant in total amount over a specific range of activity, these do not increase or decrease when the volume of manufacture changes. Fixed cost per unit is inversely proportional to the level of activity. These fixed costs are deducted from the contribution margin to calculate the net operating income.