Final answer:
The false statement is that average cost per unit is valid for predicting total costs at many different output levels, due to fixed costs remaining constant and variable costs changing with production levels.
Step-by-step explanation:
The statement that is false is that average cost per unit is valid for predicting total costs at many different output levels. This is not accurate because the average cost per unit can change as output levels change, especially due to the presence of fixed costs, which remain constant in total regardless of output level. Variable costs, like direct materials, do change with output levels. Manufacturing overhead comprises both fixed and variable costs, therefore it cannot be predicted accurately using average cost per unit across various output levels.
We calculate average variable cost by taking variable cost and dividing by the total output at each level of output. While variable costs do change with different levels of production, it is important to understand that fixed costs do not. This discrepancy can render average cost per unit less useful for predicting total costs when production levels vary widely.
Clear It Up: Total cost and average cost are not plotted on the same graph because they measure different aspects of costs. Total, fixed, and variable costs are measured in total dollars, while marginal cost, average cost, and average variable cost are measured per unit of output.