Question

Why do manager put such a great amount of emphasis on controlling fixed cost in their organizations?

  

Answer 1

Fixed costs are costs that do not change with the change with the output i.e. they will be incurred regardless of whether or not units are produced. Manager put great emphasis because of below reasons :a) A small decrease in sales would result in higher fixed costs and lower earnings.

b)Cost per unit decreases as output increases. however if there is decrease in output then cost per unit will rise. since denominator would be lower as Fixed cost per unit = Total fixed costs/Output