Question

Defining a cost as fixed or variable has no effect on whether or not the cost is considered relevant.

A. True
B. False

Answer 1

Defining a cost as fixed or variable does have an effect on whether or not the cost is considered relevant.

Step-by-step explanation:

False

The statement is false. Defining a cost as fixed or variable does have an effect on whether or not the cost is considered relevant.

Relevant costs are costs that are directly affected by a specific decision and can change based on different alternatives. Variable costs, such as the cost of raw materials, labor, or utilities, are relevant because they change with the level of production. On the other hand, fixed costs, such as rent or insurance, do not change with the level of production and may not be relevant for certain decision-making processes.