Final answer:
The statement is true; spreading fixed costs over longer periods helps mitigate the impact of fluctuating output levels on the cost per unit, thus encouraging a focus on productivity rather than month-to-month cost allocation issues.
Step-by-step explanation:
The statement 'Longer periods avoid dissemination of monthly fixed indirect costs over fluctuating levels of monthly output and fluctuating quantities of the cost-allocation base' is true. Monthly fixed indirect costs, also known as fixed costs, are expenditures that a firm must incur before production starts, and they do not change regardless of the production level. By spreading these costs over a longer period, the business can reduce the impact of monthly fluctuations in output on the cost per unit. This approach can prevent substantial long-term costs by helping businesses focus on real productivity gains.
Firms with high fixed costs, like those providing online services, have high initial costs but relatively low variable costs once operational, leading to a near flat total cost curve at high levels of output. Conversely, a firm like one providing seasonal services may incur low fixed costs but experience different dynamics where diminishing marginal returns and increasing marginal costs can dramatically affect costs at higher levels of output.