How are fixed costs best defined?

Question

Quizplus · Accepted Answer

Fixed costs are costs that do not change with changes in production or sales volume. The best way to define fixed costs is to relate them to changes in activity over the relevant range of output, which means that they will remain constant in total even if production volume changes. Therefore, option A is the correct answer. Option B is incorrect because fixed costs will change if the underlying cost drivers change. Option C is incorrect because the period of time for which a cost remains fixed is not relevant to its definition. Option D is also incorrect because fixed costs are not related to a specific number of products.

How Are Fixed Costs Best Defined