What characterizes the fixed costs of a business?

What characterizes the fixed costs of a business?

• A. Must be different each month
• B. Include the cost of production materials
• C. Are the same no matter how many customers the business serves
• D. Must exceed variable costs

Answer: (C)

Fixed costs are characterized by their consistency regardless of the business's production levels or the number of customers served. They remain unchanged in the short term, meaning that even if a business experiences fluctuations in demand or output, the fixed costs will remain the same. This could include expenses such as rent, salaries for permanent employees, and insurance. The other options do not accurately describe fixed costs. For example, suggesting that fixed costs must differ each month contradicts their definition of being constant. Additionally, production materials are typically classified as variable costs because they fluctuate based on the level of production. Lastly, there's no requirement that fixed costs must exceed variable costs; a business can have varying relationships between these two types of costs based on its operational structure and strategy. Therefore, the defining feature of fixed costs is their unchanging nature relative to the scale of operations.

Fixed costs are characterized by their consistency regardless of the business's production levels or the number of customers served. They remain unchanged in the short term, meaning that even if a business experiences fluctuations in demand or output, the fixed costs will remain the same. This could include expenses such as rent, salaries for permanent employees, and insurance.

The other options do not accurately describe fixed costs. For example, suggesting that fixed costs must differ each month contradicts their definition of being constant. Additionally, production materials are typically classified as variable costs because they fluctuate based on the level of production. Lastly, there's no requirement that fixed costs must exceed variable costs; a business can have varying relationships between these two types of costs based on its operational structure and strategy. Therefore, the defining feature of fixed costs is their unchanging nature relative to the scale of operations.