Martin Shores, Inc. is facing financial difficulties and has ceased production. Management realizes that the firm will still incur $15,000 of costs each month until such time as the firm is sold. This $15,000 represents the _____ costs of the firm's operations.
A) Total.
B) Fixed.
C) Variable.
D) Net.
E) Contribution.

Question

Quizplus · Accepted Answer

Fixed costs are those costs that do not vary with the level of production or sales. Since Martin Shores, Inc. will incur $15,000 of costs each month regardless of its production level (which has ceased), these costs are fixed.