Fixed Cost is defined as which of the following?

Fixed Cost is defined as which of the following?

• A. cost that remain the same regardless of sales volume
• B. Costs that vary with sales volume
• C. Cost that is controllable by management
• D. Cost associated with marketing campaigns

Answer: (A)

Fixed costs are costs that stay the same no matter how much you produce or sell, at least within a relevant range. They are incurred to keep the operation running and do not vary with volume. Examples include rent, certain salaries, and depreciation on equipment. Because of this behavior, the definition that describes costs as remaining constant regardless of sales volume is the correct one. In contrast, costs that vary with volume (like materials or direct labor tied to output) change as you produce more or less. Controllability isn’t about how costs move with volume, but about who can influence them. Marketing costs can be fixed or variable depending on the contract or activity, so that description doesn’t define fixed costs by itself.

Fixed costs are costs that stay the same no matter how much you produce or sell, at least within a relevant range. They are incurred to keep the operation running and do not vary with volume. Examples include rent, certain salaries, and depreciation on equipment. Because of this behavior, the definition that describes costs as remaining constant regardless of sales volume is the correct one.

In contrast, costs that vary with volume (like materials or direct labor tied to output) change as you produce more or less. Controllability isn’t about how costs move with volume, but about who can influence them. Marketing costs can be fixed or variable depending on the contract or activity, so that description doesn’t define fixed costs by itself.