Managerial Accounting: Creating Value in a Dynamic Business Environment 11th Edition by Ronald Hilton,David Platt

Exercise 10

A cost analyst showed the company president a graph that portrayed the firm's utility cost as semivariable. The president criticized the graph by saying, "This fixed-cost component doesn't look right to me. If we shut down the plant for six months, we wouldn't incur half of these costs." How should the cost analyst respond?