Question

Which of the following is a fixed cost?

1) A cost that is $28.00 per unit when production is 70,000
2) A cost that is $28.00 per unit when production is 112,000
3) A cost that varies depending on the production level
4) A cost that is incurred only once

Answer 1

A fixed cost is a cost that does not change with the level of production, such as a cost of $28.00 per unit regardless of production. It remains constant. Costs that vary with production level or are incurred only once are not fixed costs.

Step-by-step explanation:

A fixed cost is a cost that does not change with the level of production. It remains constant regardless of the quantity of units produced. Option 1, which states that the cost is $28.00 per unit regardless of the production level, is an example of a fixed cost. Options 2 and 3 represent costs that vary with the production level, while option 4 refers to a cost that is incurred only once, which is not a fixed cost.