Fixed costs are always fixed

Definition: Fixed costs are fixed only within a relevant range of activity and a specific time horizon. Beyond the relevant range, fixed costs change in steps …

Reality

Fixed costs are fixed only within a relevant range of activity and a specific time horizon. Beyond the relevant range, fixed costs change in steps (e.g., adding a factory). Over the long run, all costs are variable.

Why It MattersUnderstanding why "fixed costs are always fixed" is a misconception helps avoid analytical errors and improper financial decision-making.
CategoryCost Accounting

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