Chapter 21, Problem 3DQ

To determine

21-3DQ

Introduction:

Fixed cost:

As the name suggest, fixed cost remain always fix irrespective of whatever quantities produced by company. This cost always proposed to be incurred whether we start producing units or not. This cost is not considered in decision making. This cost is used in determining our break-even level or say no profit- no loss situation. It is allocated on product manufactured on some allocation basis e.g. on the base of labor hours.

Impact on fixed cost per unit if output volume increases.