Final answer:
The electricity used in a manufacturing plant is typically a variable cost, and in the context of discontinuing a product line, it could be classified as an avoidable cost if it changes with a decision to discontinue the line. Otherwise, it might be an unavoidable cost. Sunk costs are historical costs and should not influence the decision.
Step-by-step explanation:
Ping Manufacturing is considering discontinuing one of its product lines and is analyzing its costs. When considering the electricity used in its manufacturing plant, it should be classified as a(n) unavoidable cost if this electricity cost does not change regardless of the decision to discontinue the product line. However, if the cost of electricity would decrease as a direct result of discontinuing the product line, then it becomes an avoidable cost, which the company can save on if they decide to discontinue the product line.
Fixed costs, like depreciation or rent, are typically not affected by production levels and are often considered sunk costs, which are costs that have already been incurred and cannot be recovered. Since sunk costs cannot be changed, they should not factor into the decision-making regarding the continuation of a product line. Variable costs, on the other hand, such as electricity that changes with production levels, provide relevant information for decisions about cost-cutting in the present and potential cost increases with production changes.