Fixed Costs are defined as

Fixed Costs are defined as

• A. Costs that vary with the level of activity.
• B. Independent from the volume of work.
• C. Costs that are spread over other cost items.
• D. Costs that can be attributed to a single item.

Answer: (C)

Fixed costs stay the same as production activity changes. They don’t vary with how much you produce in the short term, so they’re incurred whether you operate at a high or low level. Rent, salaries of permanent staff, and depreciation are classic examples. The idea of “spreading over other cost items” refers to how these costs are allocated to products or departments for costing, not what makes a cost fixed. The essential point is that fixed costs are independent of the volume of work.

Fixed costs stay the same as production activity changes. They don’t vary with how much you produce in the short term, so they’re incurred whether you operate at a high or low level. Rent, salaries of permanent staff, and depreciation are classic examples. The idea of “spreading over other cost items” refers to how these costs are allocated to products or departments for costing, not what makes a cost fixed. The essential point is that fixed costs are independent of the volume of work.