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Why are no variable costs incurred during planning and design stage? Is it because no units are being produced yet?
Why is decommissioning factories a fixed cost? Should not it depend on the number of factories or industrial complexes?
What is the concept of service cost at the time of abandonment? Please give an example.
For the first question the answer is yes. It’s because no Labour, material or other direct expenses are being incurred as no units are being produced.
For the second question- Decommissioning factories is a fixed cost per asset because it represents a one-time expense to retire a specific facility. If multiple factories are being decommissioned it is variable with respect to the number of assets but not to the number of units.
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