Question

Why is it artificial to unitize fixed costs?

Answer 1

Fixed costs are such costs which are associated with the products along with the variable costs. Fixed costs always remains the same for a certain number of products and does not changes even after that increase or decrease in the number of products.

Fixed costs are classified separately from variable costs as such classification helps in predicting the cost amount of different sales and/or production levels.

Generally, it is considered that costs will increases with the increase in the production level, but this is not so in the case of fixed costs. They remains the same after certain production level, only variable cost increases or decrease.

Now, it is considered artificial to unitize fixed costs as generally fixed costs are not unitized but whenever fixed cost unitized, it is done to make fixed costs appear variable. Only in case of product costing fixed costs are unitized.