Which of the following is an example of a fixed cost?

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Multiple Choice

Which of the following is an example of a fixed cost?

Fixed costs stay the same in the short run regardless of how much you produce or sell. Rent fits this description because the lease payment is typically a set amount each period, not changing with production volume. This is different from variable costs, which move with activity: sales commissions rise as sales increase, while direct materials and direct labor vary with the number of units produced. So rent is the example of a fixed cost.

Fixed costs stay the same in the short run regardless of how much you produce or sell. Rent fits this description because the lease payment is typically a set amount each period, not changing with production volume. This is different from variable costs, which move with activity: sales commissions rise as sales increase, while direct materials and direct labor vary with the number of units produced. So rent is the example of a fixed cost.

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