Which of the following is an example of fixed cost?

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Multiple Choice

Which of the following is an example of fixed cost?

Explanation:
Fixed costs are expenses that stay the same regardless of how much you produce or sell in the short term. Rent fits this because the lease payment is usually fixed each period, not changing with production volume. Wages based on hours worked are variable since they move with the number of hours labor is needed. Raw materials that vary with production are variable because more production means more materials. Sales commissions are also variable because they depend on sales activity. So rent is the fixed cost.

Fixed costs are expenses that stay the same regardless of how much you produce or sell in the short term. Rent fits this because the lease payment is usually fixed each period, not changing with production volume. Wages based on hours worked are variable since they move with the number of hours labor is needed. Raw materials that vary with production are variable because more production means more materials. Sales commissions are also variable because they depend on sales activity. So rent is the fixed cost.

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