Which of the following is most likely to be a fixed cost for a business?
A) payment for raw materials used in manufacturing goods
B) interest payments on a loan used to finance the construction of a building
C) shipping charges for the delivery of products
D) wages paid to temporary workers

Question

Quizplus · Accepted Answer

Interest payments on a loan used for building construction are most likely to be a fixed cost as they do not change with the level of production or sales.

Note: A may also be considered a fixed cost in some cases, such as in a contract manufacturing arrangement where a fixed amount of raw materials is purchased regardless of the level of production. However, in general, raw materials are considered a variable cost. C and D are definitely variable costs as they depend on the level of production and sales.

Which of the Following Is Most Likely to Be a Fixed