Final answer:
The incorrect statement is that cost averaging should only be used for fixed costs and not for variable costs; this is false as both types of costs should be included in average cost calculations to accurately reflect a company's overall expenses.
Step-by-step explanation:
Selecting the incorrect statement regarding the use of average unit costs, we can look at the options provided. The correct interpretations for average cost usage include the value in capturing seasonal fluctuations, its relevance in decision-making over actual costs, and as a means to evaluate performance within parts of the organization. However, the statement that cost averaging should only be used for fixed costs, not variable costs, is incorrect.
Both fixed and variable costs contribute to the total costs and are important when it comes to understanding the overall expenses of a company. Variable costs change with production levels, and integrating them into average cost calculations can provide management with a more dynamic and accurate representation of costs over time. In short, average cost calculations should include all types of costs to offer comprehensive insights for a firm.
The lessons from alternative measures of costs indicate that breaking down total costs into different components, such as fixed cost, marginal cost, average total cost, and average variable cost, is valuable as each statistic offers unique insights for a firm. This decomposition aids in a clearer understanding of how costs behave and how they are accrued within various production levels.