As Output Increases, Average Fixed Cost

question 13

Multiple Choice

As output increases, average fixed cost

• A) always decreases.
• B) increases, then decreases.
• C) decreases, then increases.
• D) remains constant.

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Definitions:

Product Cost

encompasses all costs incurred to produce a product, including direct materials, direct labor, and manufacturing overhead.

Advertising

A marketing communication that employs an openly sponsored, non-personal message to promote or sell a product, service, or idea.

Period Costs

Costs that are not directly tied to the production of goods and are expensed in the accounting period they are incurred, such as sales and administrative expenses.

Prime Cost

The combined costs of raw materials and direct labor involved in the production of a product.