The phrase "spreading the overhead" refers to
A)the decrease in total cost that occurs as a firm reduces the size of its work force.
B)the decrease in average fixed cost that occurs as a firm increases its output.
C)the decrease in average variable cost that occurs as a firm increases its output.
D)the decrease in total fixed cost that occurs as a firm increases its output.

Question

Quizplus · Accepted Answer

"Spreading the overhead" refers to the decrease in average fixed cost that occurs as a firm increases its output. This is because the fixed costs (such as rent, salaries of management) remain constant regardless of the output level, so as the output increases, the fixed costs are spread over a larger number of units, resulting in a decrease in average fixed cost.

The Phrase "Spreading the Overhead" Refers to