Fixed costs ______.

Fixed costs ______.

• A. Remain at the same level despite changes in production
• B. Increase with production
• C. Decrease with production
• D. Remain unchanged with production

Answer: (D)

Fixed costs stay constant in total as production changes. These are committed expenses that the business must pay regardless of output, such as rent, insurance, or salaried staff. Because they don’t vary with how much is produced, the total fixed cost remains the same whether production is high or low. Keep in mind that the fixed cost per unit moves oppositely: it falls as output increases and rises as output decreases. Only if capacity or fixed contractual terms change would the amount of fixed costs themselves change.

Fixed costs stay constant in total as production changes. These are committed expenses that the business must pay regardless of output, such as rent, insurance, or salaried staff. Because they don’t vary with how much is produced, the total fixed cost remains the same whether production is high or low. Keep in mind that the fixed cost per unit moves oppositely: it falls as output increases and rises as output decreases. Only if capacity or fixed contractual terms change would the amount of fixed costs themselves change.