Question

If a company has excess capacity, ________ will be an unavoidable cost.

A : variable overhead

B : fixed overhead

C : cost of sales

D : operating expenses

Answer 1

We know, all variable costs are avoidable costs as with respect to production it varies. so, Variable costs are not unavoidable costs.

Some fixed overheads are avoidable and some fixed costs are unavoidable. so, we cannot say accurately.

Cost of sales is not a single category of cost. so cannot say accurately.

Operating expenses are irrespective of activity level to be incurred. So, Operating expenses are unavoidable costs.

So, option D i.e. Operating expenses is correct answer.