Which of the following statements is false? a. Fixed costs are never relevant. b. Variable costs are never relevant. c. Usually, variable costs are irrelevant. d. Step costs are irrelevant when a decision alternative requires moving outside of the existing relevant range. e. All of these choices are correct.

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Business

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2 December, 08:31

Which of the following statements is false? a. Fixed costs are never relevant. b. Variable costs are never relevant. c. Usually, variable costs are irrelevant. d. Step costs are irrelevant when a decision alternative requires moving outside of the existing relevant range. e. All of these choices are correct.

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Answers (1)

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Fatima Brown · Answer 1

a. Fixed costs are never relevant.

Explanation:

Fixed costs represent those costs which remain constant irrespective of the level of output.

Examples of fixed costs would be rent of the factory. No matter what be the production in the factory, a fixed factory rent will always be payable.

Variable costs represent those costs which change or vary with the level of output or production. Variable costs are relevant for decision making process. e. g commission on sales which is payable as a specific percentage of value of sale (which varies).

Fixed costs are usually not considered relevant for decision making.