Allocating fixed costs on a per unit basis will often cause the managers receiving the allocations to perceive the costs as variable.

Question

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Allocating a fixed cost on a per unit basis can make the cost appear variable because the total cost will increase or decrease based on the number of units produced, even though the fixed cost stays the same. This can lead managers to believe that the cost is more variable than it actually is.

Allocating Fixed Costs on a Per Unit Basis Will Often