Micro Enterprise Credentials 2025 – 400 Free Practice Questions to Pass the Exam

A fixed cost is an expense that does not change with the level of production or sales. Monthly rent is a prime example of a fixed cost because it remains constant regardless of the business's performance or output. Businesses pay the same amount in rent each month, providing a predictable expense that contributes to financial planning and stability.

In contrast, costs like the cost of goods sold fluctuate depending on the volume of products manufactured or sold, making them variable costs. Similarly, hourly labor costs can vary based on the number of hours worked, which also ties them to production levels. Office supplies may vary in cost depending on usage and purchasing decisions, categorizing them as variable rather than fixed costs. Thus, monthly rent stands out as the correct representation of a fixed cost.