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

---

Definitions:

Costing System

A method or procedure adopted by a business to estimate the cost of its products for inventory valuation, cost control, and decision making.

Overapplied Overhead

Occurs when the overhead allocated to products or services is more than the actual overhead costs incurred.

Profit Margin

The percentage of revenue that exceeds the cost of goods sold, indicating the profitability of a product or service.

ABC Limitations

Challenges and constraints of Activity-Based Costing, such as its complexity and the potential for inaccurate cost allocation.