Jodi recently went into business producing widgets. Which of the following would be a fixed cost for her firm?
1. labour costs are $1000 per month
2. raw material costs are $5000 per month
3. a one- year lease on a building is $12 000
A) 1 only
B) 2 only
C) 3 only
D) 1 and 2
E) 2 and 3

Question

Quizplus · Accepted Answer

A fixed cost is a cost that does not vary with production or sales level. Option 1 is a variable cost as it depends on the amount of labor Jodi needs. Option 2 is also a variable cost as it depends on the amount of raw material needed. Option 3, the lease on a building, is a fixed cost as it remains the same regardless of the production or sales level.

Jodi Recently Went into Business Producing Widgets