What is a characteristic of fixed expenses?

What is a characteristic of fixed expenses?

• A. They change frequently during the year
• B. They are unpredictable
• C. They remain consistent regardless of usage
• D. They are always the highest monthly cost

Answer: (C)

A key characteristic of fixed expenses is that they remain consistent regardless of changes in production levels, sales volume, or usage. This stability allows businesses and individuals to predict their costs more accurately, which is crucial for budgeting and financial planning. Fixed expenses include costs like rent or mortgage payments, salaries for permanent staff, and insurance premiums, which do not fluctuate with activity levels. In contrast, other characteristics of expenses, such as variability or unpredictability, apply more to variable expenses, which differ based on the level of goods or services produced. While some expenses may be high, there's no guarantee that fixed expenses are always the highest; they simply remain consistent over time. Thus, option C effectively captures the essence of fixed expenses in financial contexts.

A key characteristic of fixed expenses is that they remain consistent regardless of changes in production levels, sales volume, or usage. This stability allows businesses and individuals to predict their costs more accurately, which is crucial for budgeting and financial planning. Fixed expenses include costs like rent or mortgage payments, salaries for permanent staff, and insurance premiums, which do not fluctuate with activity levels.

In contrast, other characteristics of expenses, such as variability or unpredictability, apply more to variable expenses, which differ based on the level of goods or services produced. While some expenses may be high, there's no guarantee that fixed expenses are always the highest; they simply remain consistent over time. Thus, option C effectively captures the essence of fixed expenses in financial contexts.