Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Monthly rent for office space
B
Utility bills that vary with usage
C
Costs of raw materials that fluctuate
D
Employee wages based on hours worked
Understanding the Answer
Let's break down why this is correct
Answer
A fixed cost in a business is an expense that does not change regardless of how much the business produces or sells. For example, if a company rents a building for $1,000 each month, this rent is a fixed cost because it has to be paid every month, no matter how many products they sell. This means that even if the business sells zero items, they still need to pay that $1,000. Understanding fixed costs is important for businesses because it helps them plan their budgets and make decisions about pricing and production. By knowing their fixed costs, businesses can better determine how much money they need to make to cover their expenses and be profitable.
Detailed Explanation
Fixed costs stay the same no matter what. Other options are incorrect because Some might think all costs are fixed; It's easy to confuse these with fixed costs.
Key Concepts
fixed costs
Topic
Understanding Fixed Costs and Decisions
Difficulty
easy level question
Cognitive Level
understand
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