Figure 7-5 -Which of the Following Is a Fixed Cost

question 139

Multiple Choice

Figure 7-5
-Which of the following is a fixed cost?

• A)Electricity
• B)Worker bonuses
• C)Mortgage on the building
• D)Steel to produce refrigerators

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Definitions:

Fixed Costs

Costs that do not change with the level of production or sales, such as rent, salaries, and insurance premiums, providing a basis for operational planning.

Operating Profit

Earnings before interest and taxes (EBIT), representing the profit a company makes from its operations after subtracting operating expenses from revenue.

Sales Mix

The proportion of different products or services that make up the total sales of a company.

Unit Contribution Margin

The amount each unit sold contributes to covering fixed costs and generating profit, calculated by subtracting variable costs per unit from the selling price per unit.