Fixed Costs Are Associated with the Capacity to Produce Goods

question 118

True/False

Fixed costs are associated with the capacity to produce goods, not to the actual goods produced.

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Definitions:

Raw Material

Basic materials used in the production process as inputs to create finished goods.

Work in Process

Items that are in the middle stages of production, neither raw materials nor finished goods, reflecting the cost of ongoing manufacturing activities.

Property, Plant, and Equipment

Long-term assets owned by a business for use in production, manufacturing, or administrative functions, not intended for sale.

Standard Cost System

This system assigns predetermined costs to the manufacture of products and services, used for budgeting and controlling expenses.