Which of the following best describes a fixed cost? A cost which:Represents a fixed proportion of total costsRemains at the same level up to a particular level of outputHas a direct relationship with output.Remains at the same level when output increases.
Question
Which of the following best describes a fixed cost? A cost which:Represents a fixed proportion of total costsRemains at the same level up to a particular level of outputHas a direct relationship with output.Remains at the same level when output increases.
Solution
A fixed cost is best described as a cost that remains at the same level when output increases. This is because fixed costs do not change with the level of production or sales. They are expenses that have to be paid by a company, independent of any business activity. Examples include rent, salaries, and insurance.
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