tamuhta87 Posts: 1, Reputation: 1 New Member #1 Apr 11, 2006, 04:27 PM
Fixed cost are really variable
I need some help regarding my college assignment..
The question is about fixed cost..

“Fixed costs are really variable. The more you produce, the smaller the unit cost of production.” Is this statement correct? Why or why not? Use an example to explain this.:confused:
 CaptainForest Posts: 3,645, Reputation: 393 Ultra Member #2 Apr 11, 2006, 11:38 PM
Since I LOVE to do your homework assignment for you, I have written up a 20 page response in my head. But since I am limited by time, I will give you the cut and dry speech of it…

The statement is NOT a correct one.

Why?

Because:
- unit costs are a soft number, not a hard one. How much electricity should be donated to 1 unit, especially if you have a multi product division, no one really knows.

- in the short run, Fixed Costs are irrelevant since they cannot be controlled. If I decided to produce 100 units of 1,000 units this month, my Fixed Costs will still be \$500. Therefore, Fixed costs are irrelevant in the short run

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