Which statement correctly describes fixed costs?

Which statement correctly describes fixed costs?

• A. They vary with output
• B. They relate only to raw materials
• C. They depend on marketing spend
• D. They remain constant regardless of production volume

Answer: (D)

Fixed costs are expenses that do not change with the level of production in the short term. They must be paid whether you produce nothing or a lot. Examples include rent, salaries of permanent staff, and insurance. Because they stay the same regardless of output, fixed costs are described as constant across production volumes. Other costs vary with production, such as raw materials. Marketing spend can be fixed or variable depending on the arrangement, but the defining trait of fixed costs is their constancy with output, which is why remaining constant regardless of production volume is the correct description.

Fixed costs are expenses that do not change with the level of production in the short term. They must be paid whether you produce nothing or a lot. Examples include rent, salaries of permanent staff, and insurance. Because they stay the same regardless of output, fixed costs are described as constant across production volumes. Other costs vary with production, such as raw materials. Marketing spend can be fixed or variable depending on the arrangement, but the defining trait of fixed costs is their constancy with output, which is why remaining constant regardless of production volume is the correct description.