Suppose Sam's Shoe Co.makes one kind of shoe.An example of a fixed cost for this company would be:
A) the lease for the factory building.
B) the leather needed to make the shoes.
C) the needles for the sewing machines that need to be replaced after sewing every 1,000 pairs.
D) All of these are examples of fixed costs.

Question

Quizplus · Accepted Answer

A fixed cost is a cost that does not change regardless of the level of production or sales. The lease for the factory building is a fixed cost because it remains constant, regardless of whether the company produces 1,000 pairs of shoes or 10,000 pairs of shoes. The cost of leather and needles can vary depending on the level of production, so they are considered variable costs, not fixed costs.