Fixed costs may or may not be relevant in decisions about whether a product should be dropped.

Question

Quizplus · Accepted Answer

Fixed costs are costs that do not change with changes in the level of production or sales volume. In decision-making, only relevant costs are considered, which are costs that would change or vary depending on the decision. Therefore, fixed costs that do not change or vary with the decision may not be relevant in determining whether a product should be dropped. However, there may be other relevant costs and factors to consider, such as variable costs, contribution margin, demand and revenue, competition, and strategic objectives.

Fixed Costs May or May Not Be Relevant in Decisions