Question

Which of the following is a fixed cost for a company that sells high-end tennis shoes in a mall?

Option 1: The rent paid to the mall for the mall retail space.
Option 2: New inventory to sell to consumers to replace the shoes sold.
Option 3: The packaging and bags for consumer purchases.
Option 4: The production of brochures, flyers, and webpage upkeep to market the business.

Answer 1

The rent paid to the mall for the retail space is the fixed cost for a company selling high-end tennis shoes in a mall. Fixed costs remain constant regardless of sales volume, whereas inventory, packaging, and marketing are variable costs.

Step-by-step explanation:

Among the options provided, the fixed cost for a company that sells high-end tennis shoes in a mall would be Option 1: The rent paid to the mall for the retail space. Fixed costs are expenses that do not change with the level of production or sales, and examples include rent, the cost of machinery or equipment, and research and development costs. Rent on a retail space is a classic example of a fixed cost because it remains constant regardless of the number of shoes sold. In contrast, inventory, packaging, and marketing expenses tend to vary with the volume of sales and are considered variable costs.