Asked by Phyllisa Starks on Jul 21, 2024
Verified
A fixed cost is a cost which
A) varies in total with changes in the level of activity.
B) remains constant per unit with changes in the level of activity.
C) varies inversely in total with changes in the level of activity.
D) remains constant in total with changes in the level of activity.
Fixed Cost
Expenses that do not change with the volume of production or sales, such as rent, salaries, and insurance premiums.
Activity Level
The activity level is a measure of volume of work or operations, which could influence costs and operational efficiency within a business.
- Distinguish among variable, fixed, and mixed costs, and understand their reactions to activity level fluctuations.
Verified Answer
TB
Tessa BanksJul 21, 2024
Final Answer :
D
Explanation :
A fixed cost remains constant in total with changes in the level of activity. For example, rent for a building is a fixed cost that remains the same regardless of how many units are produced or sold.
Learning Objectives
- Distinguish among variable, fixed, and mixed costs, and understand their reactions to activity level fluctuations.