Which of the Following Statements About Fixed Costs Is Correct

question 103

Multiple Choice

Which of the following statements about fixed costs is correct?

• A) Fixed costs are not opportunity costs.
• B) Fixed costs must be paid even if the firm's output is zero.
• C) Fixed costs are always the largest portion of total costs.
• D) none of the above

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Definitions:

Factory Overhead Rates

Calculated rates used to allocate a factory's indirect costs to products being produced, aiding in determining total production costs.

Plantwide Rate

A single, uniform overhead absorption rate used throughout an entire factory or plant, applied to all units irrespective of the department in which the costs were incurred.

Product Costs

Expenses directly associated with the manufacture of a product, including materials, labor, and overhead.

Factory Overhead Allocated

The portion of factory overhead costs assigned to each unit of production, based on a predetermined formula.