When the Fixed Costs of Capacity Are Spread Over the Level

question 4

True/False

When the fixed costs of capacity are spread over the level of activity at capacity rather than the estimated activity for the period,the units that are produced must shoulder the costs of unused capacity.

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Definitions:

Average Fixed Costs

The fixed costs of production divided by the quantity of output produced, illustrating how fixed costs dilute with increased output.

Average Total Costs

The cost per unit produced calculated by dividing the total cost of production by the quantity of output.

Average Fixed Cost

The fixed cost per unit of output, calculated by dividing total fixed costs by the quantity of output produced.

Line Segment AB

The part of a line that is bounded by two distinct end points, and contains every point on the line between its endpoints.