Question

N deciding whether to add or delete a product, the insurance expense associated with the custom-built equipment used to produce the product is an ________ cost. Assume the equipment will be sold if the company discontinues the product. Select one:

A. avoidable fixed
B. unavoidable fixed
C. unavoidable variable
D. avoidable variable

Answer 1

A. avoidable fixed.

Step-by-step explanation:

Avoidable costs are expense which can be avoided if an activity is terminated. Avoidable fixed costs are flat rate overheads which a company can eliminate if a certain activity is not performed. When the custom-built equipment is sold out if the product is discontinued, then the insurance expense will not incur resulting in the expense being eliminated.