Fixed costs are a function of ____, and variable costs are a function of ____.
A) productivity; economy
B) economy; time
C) management; time
D) management; productivity
E) time; volume

Question

Quizplus · Accepted Answer

Fixed costs are independent of the volume of production or sales and remain constant over time. They are incurred regardless of the level of output. Examples of fixed costs include rent, salaries, and insurance. On the other hand, variable costs depend on the volume of production or sales and increase or decrease with changes in output. Examples of variable costs include the cost of raw materials, direct labor, and sales commissions. Therefore, fixed costs are a function of time (they are incurred over a specific period), while variable costs are a function of the volume of output. Hence, option E is the correct choice.

Fixed Costs Are a Function of ____, and Variable Costs