Which of the following is an example of total fixed cost?

Boost your CLEP Marketing exam score with our comprehensive study materials. Access flashcards, multiple-choice questions, and detailed explanations to prepare effectively.

Total fixed costs are expenses that do not change with the level of goods or services produced by a business. Rent and insurance are classic examples of fixed costs because they must be paid regardless of the company's production levels or sales volume. For instance, a company pays a specific amount for rent each month, and this expense will remain the same whether it produces a lot of goods or none at all.

On the other hand, packaging materials, sales commissions, and production labor costs vary directly with production levels or sales activity. Packaging materials are tied to the number of products being packaged, sales commissions fluctuate based on sales performance, and production labor costs can change with overtime or when more workers are needed based on demand. Thus, rent and insurance distinctly represent fixed costs in contrast to these variable costs.

Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy