Which of the following statements is true when referring to fixed costs?
A) Committed fixed costs arise from the annual decisions by management.
B) As volume increases, unit fixed cost and total fixed cost will change.
C) Fixed costs increase in total throughout the relevant range.
D) Discretionary fixed costs can often be reduced to zero for short periods of time without seriously impairing the long-run goals of the company.

Question

Quizplus · Accepted Answer

Fixed costs are costs that remain constant regardless of the level of production or sales. Committed fixed costs arise from long-term decisions made by management, such as investments in infrastructure, while discretionary fixed costs are expenses that can be adjusted in the short term, such as advertising or training expenses. Generally, fixed costs per unit decrease as volume increases, as the cost is spread over a larger number of units. However, total fixed costs remain constant within the relevant range of production. Discretionary fixed costs can often be reduced or eliminated for short periods of time without significantly affecting the company's long-term goals.

Which of the Following Statements Is True When Referring to Fixed