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Question 4

An expense that stays the same when there is an increase in the volume of product produced is categorized as a:

Click the button next to the correct answer choice. After you have read the feedback, explore the other choices. Note: Your first selection will be used in tallying your score.

  • Fixed cost

  • The best choice

    Correct choice. Fixed costs, such as rent, administrative costs, and insurance, do not vary with incremental changes in production volumes.

  • Variable cost

  • Not the best choice. Variable costs do not stay the same when production levels change. Instead, they typically rise or fall in step with changes in production. Examples of variable costs include direct labor, raw materials, and packaging and shipping. Fixed costs, such as rent, interest expense, and administrative costs remain the same when there are incremental changes in production volumes.

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