Question

Under what circumstances would fixed costs be relevant when management is making
decisions in a multiproduct setting?

Answer 1

Answer:

Fixed costs are relevant anytime they change with the product mix decision. For example, if there are fixed costs that can be eliminated with the elimination of one or more of the individual products, then those fixed costs might be relevant in a multi-product setting. They would be relevant if the contribution from production of any one product was insufficient to cover the fixed costs that could be eliminated.

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