Final answer:
Traceable Fixed Costs can become sunk costs, which are expenses that have already been incurred and can't be recovered. The correct answer is a.
Step-by-step explanation:
When examining costs in a business context, specifically within the field of accounting and cost management, it is important to understand the nature of different types of costs and how they behave under various circumstances. Fixed costs are expenses that do not change with the level of production or sales. Examples include rent for a factory or retail space, machinery costs, research and development, and advertising. These costs are termed 'fixed' because they are not directly tied to the amount of goods or services a company produces in the short run.
Some fixed costs, however, may eventually become sunk costs. Sunk costs refer to money that has already been spent and cannot be recovered. It's a common principle in business that sunk costs should be ignored when making future business decisions, as they cannot be altered by current or future actions. An example of a sunk cost is a non-refundable deposit on equipment. In the context of the question, Traceable Fixed Costs can become sunk costs because once these costs are incurred, they cannot be recouped, regardless of future business outcomes.
On the other hand, variable costs are costs that change directly with the level of production. These typically include raw materials, direct labor, and any other expenses that vary with output. Unlike fixed costs, variable costs provide information on the firm’s ability to reduce expenses and the impact on costs of changing production levels.
In conclusion, Traceable Fixed Costs can become sunk costs, as they are expenses that have already been incurred and cannot be changed, regardless of changes in production levels or sales.