Fixed Expenses are?

• A. Costs that change depending on production levels.
• B. One-time start-up costs.
• C. Costs that remain constant regardless of production levels.
• D. Legal fees.

Answer: (C)

Fixed expenses are costs that stay constant regardless of production levels. This means they don’t change when you produce more or less, at least within a certain range, making them predictable and part of the baseline cost structure. Common examples include rent or lease payments, salaried staff not tied to output, insurance, and depreciation on equipment. Because these costs don’t vary with how much you produce, they’re important for budgeting and for calculating break-even points.

In contrast, costs that change with production levels are variable costs, such as raw materials or direct labor that scale with output. One-time startup costs aren’t fixed expenses in the ongoing sense; they’re initial expenditures that don’t repeat with production volume. Legal fees aren’t inherently fixed either—they can be hourly (variable) or fixed by agreement.