Certified Internal Auditor (CIA) Part 3: Business Knowledge for Internal Auditing — Question 134
Which of the following best describes the purpose of fixed manufacturing costs?
Answer options
- A. To ensure availability of production facilities
- B. To decrease direct expenses related to production
- C. To incur stable costs despite operating capacity
- D. To increase the total unit cost under absorption costing
Correct answer: A
Explanation
The correct answer is A because fixed manufacturing costs are incurred to maintain production facilities, ensuring they are available for use. Options B and C are incorrect as they misinterpret the role of fixed costs, while option D inaccurately describes the effect of fixed costs under absorption costing.