Quick Answer: Which Statement Describes A Fixed Cost?

What best describes fixed cost?

A fixed cost is a cost that does not change with an increase or decrease in the amount of goods or services produced or sold.

Fixed costs are expenses that have to be paid by a company, independent of any specific business activities..

Why is determination of a relevant range important costs that occur outside this range are assumed to be linear Most companies operate at 100% of capacity costs outside this range cause losses to companies cost behavior outside the relevant range may be distorted?

Most companies operate at 100% of capacity. Costs that occur outside this range are assumed to be linear. Costs outside this range cause losses to companies. Cost behavior outside the relevant range may be distorted.

What is an example of variable cost?

Examples of variable costs are sales commissions, direct labor costs, cost of raw materials used in production, and utility costs. The total variable cost is simply the quantity of output multiplied by the variable cost per unit of output.

What is fixed cost with diagram?

Fixed costs are costs which do not change with change in output as long as the production is within the relevant range. It is the cost which is incurred even when output is zero. Within the relevant range, the average cost falls and the average fixed cost curve declines with increase in output. …

Is rent a fixed or variable cost?

Fixed costs often include rent, buildings, machinery, etc. Variable costs are costs that vary with output. Generally variable costs increase at a constant rate relative to labor and capital. Variable costs may include wages, utilities, materials used in production, etc.

What are fixed costs quizlet?

Fixed costs are costs that does not depend on the firms’ level of output. -These costs are incurred even if the firm is producing nothing. -There are no fixed costs in the long run.

Which is not a fixed cost?

Fixed costs are those which are fixed for the production period. Wages paid to workers however can vary as the number of workers increase or decrease. Hence it is not considered as a fixed cost.

What type of cost remains the same per unit?

Cost 2 is a fixed cost because as the number of units produced changes, total costs remain the same and per unit costs change. Cost 3 is a mixed cost because as the number of units produced changes, total cost changes (but not in proportion to changes in activity) and per unit cost changes.

What are fixed costs also known as?

Fixed costs are also known as overhead costs, period costs or supplementary costs. Variable Costs. Variable costs are also referred to as prime costs or direct costs as it directly affects the output levels.

What type of cost remains the same per unit at every level of activity?

Variable costTerms in this set (28) What type of cost remains the same per unit at every level of activity? Variable cost. A variable cost remains the same per unit at every level of activity.

What is a fixed expense example?

Fixed Expenses – Definition, Examples and Lists The definition of fixed expenses is “any expense that does not change from period to period,” such as mortgage or rent payments, utility bills, and loan payments. … Mortgage(s) Rent. Property taxes (if paying monthly)

What is the relevant range?

The relevant range is the range of activity where the assumption that cost behavior is a straight line (linear) is reasonably valid. Managerial accountants like to assume that the relationship between a cost and an activity run in a straight line.

Is fuel a fixed cost?

Fixed costs, as opposed to variable costs, are defined as costs that remain the same over a period of time. Conversely, variable costs are subject to change and include things like fuel, oil, maintenance, landing fees, etc. An aircraft’s fixed costs remain the same no matter how many hours you fly your plane.

What is the formula for total costs?

Total costs = fixed costs + variable costs Question Calculate: The total fixed costs incurred by the sandwich shop. The total variable costs incurred by the sandwich shop. The total costs incurred by the sandwich shop.

Is rent a fixed cost?

Unlike variable costs, a company’s fixed costs do not vary with the volume of production. Fixed costs remain the same regardless of whether goods or services are produced or not. … The most common examples of fixed costs include lease and rent payments, utilities, insurance, certain salaries, and interest payments.