Fixed Costs That Do NOT Differ Between Two Alternatives Are

question 95

Multiple Choice

Fixed costs that do NOT differ between two alternatives are:

• A) considered opportunity costs.
• B) irrelevant to the decision.
• C) important only if they represent a material dollar amount.
• D) relevant to the decision.

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Definitions:

Direct Material

Raw materials that are directly traceable to the manufacturing of a specific product and constitute a significant portion of the product's cost.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate estimated overhead costs to products or job orders based on a selected activity base.

Direct Labour Hours

The total time workers spend producing goods or delivering services, directly tied to the production output.

Manufacturing Overhead

The indirect costs associated with manufacturing, not directly tied to a specific product, such as maintenance, utilities, and salaries of supervisors.