Question

Which of the following items would typically be categorized as fixed costs in a business?

A) Rent
B) Supervisory salaries
C) Advertising
D) Shipping costs

Answer 1

Typically, rent and supervisory salaries are categorized as fixed costs in a business because they remain constant regardless of the production level. Advertising and shipping costs vary and are considered variable costs.

Step-by-step explanation:

In a business, fixed costs are expenditures that do not change regardless of the level of production. Items that are typically categorized as fixed costs include rent and supervisory salaries. Rent is a classic example of a fixed cost because once a lease is signed, the rent payment is the same until the lease expires, irrespective of how much is produced. Supervisory salaries are generally fixed as they are set contracts with managers who are paid the same regardless of production levels. Conversely, costs like advertising and shipping costs can vary depending on the level of sales and production, making them variable rather than fixed costs.