Final Answer:
Raw materials (Option 3) are not typically classified as fixed operating expenses. Fixed operating expenses encompass costs like rent, utilities, and depreciation, which remain constant irrespective of production levels, unlike the varying nature of raw material costs tied directly to production volumes. Thus the correct option is 3) Raw materials.
Step-by-step explanation:
Fixed operating expenses refer to costs that remain constant regardless of the level of production or sales. These costs are inherent to running a business but don't directly correlate with production output. Rent, utilities, and depreciation are classic examples of fixed operating expenses. Rent represents the regular payment for the space used in business operations, while utilities encompass consistent expenses like electricity, water, and heating.
Depreciation, another fixed operating expense, reflects the gradual reduction in the value of assets over time. It's an accounting method used to allocate the cost of an asset over its useful life. Raw materials, however, are not considered fixed operating expenses. Raw materials are part of the variable costs, as they directly fluctuate with production levels. When production increases, the cost of raw materials generally rises proportionately.
For a manufacturing company, raw materials are a variable expense because they're directly related to the volume of goods produced. If production increases, more raw materials are needed, consequently increasing the cost.
Conversely, if production decreases, fewer raw materials are required, reducing the associated costs. Therefore, raw materials are not categorized under fixed operating expenses but are considered variable costs due to their correlation with production levels.Thus the correct option is 3) Raw materials.