Question

1) Compared to variable overhead costs planning, *fixed overhead costs planning* have an additional strategic issue of ________.

A) eliminating activities that do not add value
B) increasing the linearity between total costs and volume of production
C) choosing the appropriate level of investment
D) identifying essential value-adding activities

Answer 1

The additional strategic issue in fixed overhead costs planning is choosing the appropriate level of investment, as these costs are consistent and do not vary with production levels.

Step-by-step explanation:

Compared to variable overhead costs planning, fixed overhead costs planning have an additional strategic issue of choosing the appropriate level of investment. Fixed costs are expenditures that do not change regardless of the level of production. Examples include rent on a factory, the cost of machinery, or research and development costs. These are costs for fixed inputs like capital, which do not vary in the short run. The strategic planning for fixed overhead involves determining the right amount of investment in these fixed inputs that align with the company's long-term production and financial goals. Unlike variable costs, which vary with production volume and typically show diminishing marginal returns, fixed costs are sunk costs and are consistent regardless of production levels in the short run.