Answer to Question #166312 in Management for Isaac Narh

Question

The concept of relevant range does not apply to fixed cost True or False

Answer 1

True, Fixed overhead costs, as the name suggests are costs incurred by a company that remains constat irrespective of the level of activity. In other words,they do not change even if the level of volume produced by the company changes. Few of the examples of fixed overhead costs include, Rent of factory equipment, Office and administrative salaries, etc. When making decisions to accept special orders, make or buy, etc, generally Fixed overhead costs are not relevant as they continue to be incurred irrespective of taking the decision or not.