How is a fixed cost defined?

Question

BlackTom AI · Accepted Answer

A fixed cost remains constant in total regardless of changes in the level of activity (within the relevant range).

1. Relevant knowledge points and concepts
- Fixed cost: a cost that does not change in total with short-term changes in activity or production volume (e.g., rent, salaried wages, insurance).
- Variable cost: changes in total with activity (e.g., direct materials, direct labor paid per unit).
- Per-unit behavior: total fixed cost is constant, but fixed cost per unit decreases as output increases (because the same total is spread over more units).
- Relevant range: the span of activity over which the fixed-cost assumption holds.

2. Step-by-step reasoning process
- Identify the behaviour required by the definition: does total cost remain unchanged as activity changes? If yes, it is fixed in total.
- Compare options: choose the description that states constancy irrespective of activity level.

3. Numerical illustration (intermediate steps shown)
- Suppose monthly rent = $1,000 (a fixed cost).
- If production = 100 units, fixed cost per unit = $1,000 / 100 = $10 per unit.
- If production = 200 units, fixed cost per unit = $1,000 / 200 = $5 per unit.
- Total fixed cost remains $1,000 in both cases even though per-unit cost changed.

4. Why the correct answer is correct
- Option A directly states that the cost “stays the same irrespective of changes in the level of activity,” which matches the definition and the numerical illustration: total fixed cost does not vary with activity within the relevant range.

5. Why the other options are incorrect
- Option B: describes a variable cost (changes with activity), not a fixed cost.
- Option C: claims the cost "stays the same per unit as the number of units changes." That describes variable cost per unit (which is constant), but fixed costs are constant in total, not per unit—the per-unit fixed cost actually changes inversely with output.
- Option D: “a fixed proportion of profit” is unrelated to the definition of fixed cost; fixed costs do not depend on profit.

6. Conclusion
- The correct answer is: "A cost that stays the same irrespective of changes in the level of activity." This matches the provided answer.

How is a fixed cost defined?单项选择题

类似问题

A firm's insurance premiums are generally considered costs.

Which of the following would be classified as a fixed cost for a T-shirt manufacturer?

Table 3 shows the short-run production costs for a car wash: [table] Costs | Cost per month ($) Land lease | 4,000 Workers’ wages | 2,600 Car wash machines | 3,000 Water | 1,500 Cleaning chemicals | 900 [/table] In the short run, calculate the car wash's fixed costs in Table 3.

Table 3 shows the short-run production costs for a car wash: [table] Costs | Cost per month ($) Land lease | 4,000 Workers’ wages | 2,600 Car wash machines | 3,000 Water | 1,500 Cleaning chemicals | 900 [/table] In the short run, calculate the car wash's fixed costs in Table 3.

Table 3 shows the short-run production costs for a car wash: [table] Costs | Cost per month ($) Land lease | 4,000 Workers’ wages | 2,600 Car wash machines | 3,000 Water | 1,500 Cleaning chemicals | 900 [/table] In the short run, calculate the car wash's fixed costs in Table 3.

Table 3 shows the short-run production costs for a cinema: [table] Resource | Cost per month ($) Cinema building | 6,500 Staff wages | 2,800 Projectors and screens | 3,500 Popcorn supplies | 1,200 Electricity | 1,000 [/table] In the short run, calculate the cinema's fixed costs in Table 3.

Fixed costs are expenses that ________.

How will fixed cost be affected if production increases by 20%?

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单