An example of a committed fixed cost for a clothing manufacturer is
A)an annual contract for television advertising costs.
B)a 10-year lease on an office building.
C)yards of fabric used.
D)thread used.

Question

Quizplus · Accepted Answer

A 10-year lease on an office building is a committed fixed cost because it is a long-term obligation that the clothing manufacturer cannot easily change or terminate. On the other hand, buying yards of fabric and thread are variable costs because they will vary based on the quantity of clothing being produced. An annual contract for television advertising costs may also be a fixed cost, but it is not necessarily committed because the clothing manufacturer may have the option to opt out or renegotiate the contract after the initial term.

An Example of a Committed Fixed Cost for a Clothing