Fixed costs:
A) change as a small quantity of output produced changes.
B) are constant over the short-run regardless of the quantity of output produced.
C) are defined as the change in total costs when one more unit of output is produced.
D) are subtracted from sales to compute the contribution margin.
E) can be ignored in scenario analysis since they are constant over the life of a project.

Question

Quizplus · Accepted Answer

Fixed costs are the expenses that do not vary with the level of output or sales. They remain constant in the short run regardless of the quantity of output produced. This is why choice B is the correct answer. Choice A is incorrect because it describes variable costs instead. Choice C is incorrect because it defines the concept of marginal cost. Choice D is incorrect because it refers to the contribution margin formula. Choice E is incorrect because fixed costs can impact scenario analysis and should be considered in project planning.

Fixed Costs