Fixed cost are constant on both the total cost and per unit cost basis True False

Fixed cost are constant on both the total cost and per unit cost basis

	True
	False

Expert Solution

Answer---- False

Fixed cost is constant on total cost but not on Per unit basis.

Fixed cost does not change with the change in production upto a particular level of production. Fixed cost per unit increase when production decrease and decrease when production increase.

This is because when production increase fixed cost remains the same and cost allocated to all the products reduces. This can be illustrated with an example given below

Suppose a company can produce 90000 units at 100% capacity at which fixed cost per year is $1800000.00. Fixed cost at different levels of production will be

(A)	Fixed cost	$ 1,800,000.00	$ 1,800,000.00	$ 1,800,000.00	$ 1,800,000.00
(B)	Units Produced	50000	75000	88000	90000
(A/B)	Fixed cost per unit	$ 36.00	$ 24.00	$ 20.45	$ 20.00

It can be seen that total fixed cost is constant but when production increase fixed cost per unit produced decreases.

ekkarill92 answered 1 year ago

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