Ethan is an operations unit manager for Morningstar Foods. So far in developing his monthly budget, he has identified the following costs: Overhead at $120,000; Packaging at $70,000; Advertising at $60,000; Salaries at $400,000; Food production at $90,000; and Distribution at $22,000. The fixed costs in this situation would be
A) overhead, packaging, advertising, salaries, food production, and distribution.
B) overhead, packaging, advertising, salaries, and distribution.
C) overhead, advertising, distribution, and salaries.
D) overhead, advertising, and salaries.
E) overhead.

Question

Quizplus · Accepted Answer

Fixed costs are those that do not change with the level of production or sales. In this case, overhead, advertising, and salaries are costs that would typically remain constant regardless of the amount of product produced or sold. Packaging, food production, and distribution costs are variable, as they would change in direct proportion to the level of production or sales.

Ethan Is an Operations Unit Manager for Morningstar Foods