Fixed costs are defined as costs that do not vary with the quantity of output produced.

Fixed costs are defined as costs that do not vary with the quantity of output produced.

• A. Costs that increase with production
• B. Costs that do not vary with output produced
• C. Costs that vary directly with output
• D. Costs tied to labor

Answer: (B)

Fixed costs are costs that stay constant regardless of how much you produce. In other words, they’re incurred even if you make nothing and don’t rise as output increases (within a given period). The statement given matches this idea: they do not vary with the quantity of output produced. Examples include rent, salaries of permanent staff, depreciation, and insurance. In contrast, variable costs change with production volume, such as raw materials and direct labor that scales with units produced, or utilities tied to production activity. The phrase “tied to labor” can describe either fixed or variable setups depending on how labor is arranged, so it isn’t a precise definition of fixed costs.

Fixed costs are costs that stay constant regardless of how much you produce. In other words, they’re incurred even if you make nothing and don’t rise as output increases (within a given period). The statement given matches this idea: they do not vary with the quantity of output produced. Examples include rent, salaries of permanent staff, depreciation, and insurance.

In contrast, variable costs change with production volume, such as raw materials and direct labor that scales with units produced, or utilities tied to production activity. The phrase “tied to labor” can describe either fixed or variable setups depending on how labor is arranged, so it isn’t a precise definition of fixed costs.