Which of the following statements regarding fixed costs is true?
A) Fixed costs rise by a constant amount for every added unit of volume.
B) While fixed costs are ordinarily constant with respect to volume, they can "step" upward if volume increases result in additional fixed costs.
C) Fixed costs are those costs associated with direct labour and materials.
D) Fixed costs equal variable costs at the break-even point.
E) Fixed cost is the difference between selling price and variable cost.

Question

Quizplus · Accepted Answer

Fixed costs are typically constant with respect to volume, but they can increase if volume increases result in additional fixed costs. This is known as a "step" increase in fixed costs. Options A, C, D, and E are all incorrect statements about fixed costs.

Which of the Following Statements Regarding Fixed Costs Is True