Which costs remain constant regardless of the level of production?

Which costs remain constant regardless of the level of production?

• A. Variable costs
• B. Fixed costs
• C. Direct costs
• D. Overhead costs

Answer: (B)

The correct answer is fixed costs. These costs are incurred regardless of the level of production and remain unchanged as production volumes fluctuate within a certain range. Examples of fixed costs include rent, salaries of permanent employees, and insurance premiums. Since these expenses do not vary with the amount of goods or services produced, they are essential for businesses to understand for budgeting and financial planning. Variable costs, on the other hand, change in direct proportion to the level of production, such as costs of raw materials or hourly wages. Direct costs refer to expenses that can be directly attributed to a specific product or service, which may include both fixed and variable elements. Overhead costs encompass all costs that are not directly linked to the production of goods or services but can include both fixed and variable costs. Thus, the distinguishing feature of fixed costs is their stability regardless of production levels.

The correct answer is fixed costs. These costs are incurred regardless of the level of production and remain unchanged as production volumes fluctuate within a certain range. Examples of fixed costs include rent, salaries of permanent employees, and insurance premiums. Since these expenses do not vary with the amount of goods or services produced, they are essential for businesses to understand for budgeting and financial planning.

Variable costs, on the other hand, change in direct proportion to the level of production, such as costs of raw materials or hourly wages. Direct costs refer to expenses that can be directly attributed to a specific product or service, which may include both fixed and variable elements. Overhead costs encompass all costs that are not directly linked to the production of goods or services but can include both fixed and variable costs. Thus, the distinguishing feature of fixed costs is their stability regardless of production levels.