Explain the Concept of the "Flaw of Averages

question 49

Essay

Explain the concept of the "flaw of averages."

---

Definitions:

Fixed Cost

Costs that remain constant in total regardless of changes in the level of production or sales activity.

Per Unit

A term used to denote the cost or price of a single item or measure of a service or product.

Relevant Range

The range of activity within which the assumptions about fixed and variable costs are valid for a specific business.

Mixed Costs

Expenses that have both fixed and variable components, changing with the level of production or sales activity but not in direct proportion.