Rental charges of $40,000 per year plus $3 for each machine hour over 18,000 hours is an example of a fixed cost.

Fixed Cost

Expenses that do not change in total regardless of the level of production or sales activity, such as rent, salaries, and insurance premiums.

Machine Hour

A machine hour is a unit of measurement representing the operation of machinery or equipment for one hour, used in calculating cost allocation and operational efficiency.

Rental Charges

Costs associated with leasing or renting property or equipment.