When fixed costs are unitized, they
A. may appear to be variable costs.
B. may cause managers to make decisions that are not in the best interest of the company as a whole.
C. are stated on a per unit basis.
D. All of the above are true.
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B is certainly true, however...
To determine the right answer to this question, it is important to understand what fixed costs and unitized fixed costs are.
Fixed costs are costs that do not vary with the level of production or sales. They remain constant regardless of the quantity of output produced. Examples of fixed costs include rent, salaries, insurance, and depreciation.
Unitized fixed costs, on the other hand, are fixed costs that are allocated on a per-unit basis. This means that these costs are divided by the number of units produced to determine the fixed cost per unit.
Now let's analyze each option to determine which one is true:
A. "When fixed costs are unitized, they may appear to be variable costs."
This statement is true. Unitizing fixed costs can make them appear similar to variable costs because they are being allocated on a per-unit basis. However, it is important to note that despite the allocation, fixed costs do not change with the level of production.
B. "When fixed costs are unitized, they may cause managers to make decisions that are not in the best interest of the company as a whole."
This statement is also true. When fixed costs are unitized, it can lead managers to view them as variable costs, which might affect their decision-making process. Managers may be inclined to increase production, assuming that the fixed cost per unit will decrease, even if it is not in the best interest of the company.
C. "When fixed costs are unitized, they are stated on a per unit basis."
This statement is true. Unitizing fixed costs means expressing them on a per-unit basis, which enables managers to better evaluate their impact on the cost of each unit produced.
D. "All of the above are true."
Based on the explanations for options A, B, and C, it is evident that all statements are true. Therefore, the correct answer is D.