Fixed costs will often be irrelevant for short-term decision making because they:
A) Do not vary on a per-unit-of-output basis.
B) Are the same each time period.
C) Typically do not differ in total between decision alternatives being considered.
D) Are not committed.
E) Cannot be estimated with precision.

Question

Quizplus · Accepted Answer

Fixed costs do not vary between decision alternatives being considered, so they do not have an impact on short-term decision making. Only costs that are directly affected by the decision, such as variable costs, should be considered in short-term decision making.

Fixed Costs Will Often Be Irrelevant for Short-Term Decision Making