Question

LO 2.2Fixed costs are expenses that ________.

vary in response to changes in activity level
remain constant on a per-unit basis
increase on a per-unit basis as activity increases
remain constant as activity changes

Answer 1

Business expenditures that are not proportionate to the number of services or goods provided by the company are fixed costs. These are sometimes linked to as manufacturing costs, like interest or rentals charged every month.

Fixed costs are often not patched on a continuous basis; they will evolve over time, and are fixed in regards to the amount of manufacturing for the corresponding time period by contractual agreement.

For instance, a business might have unavoidable and unforeseen manufacturing-related expenses, such as storage prices and so forth, just fixed over most of the lease term.