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Companies should always make and sell all products whose selling prices exceed variable costs.” Assuming fixed...

Companies should always make and sell all products whose selling prices exceed variable costs.” Assuming fixed costs are irrelevant, do you agree? Explain.

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Answer #1

This statement is wrong. First of all company should sell only those products over which it has expertise on. Others it won't be able to increase market share in a particular Product. Also selling different kinds of products require different machines , different skills , different raw material etc.

Also even though fixed cost is irrelevant while deciding whether a product is profitable or not , we have to still recover our fixed cost. Otherwise we would be at loss and unable go survive. Similarly fixed are fixed upto a extent. Many fixed cost like rent of area required will change as we increase our production beyond the existing capacity.

Feel free to ask any queries..

Also plz upvote it means a lot..thank you

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