A Fixed Cost Is a Cost Which

question 37

Multiple Choice

A fixed cost is a cost which

• A) varies in total with changes in the level of activity.
• B) remains constant per unit with changes in the level of activity.
• C) varies inversely in total with changes in the level of activity.
• D) remains constant in total with changes in the level of activity.

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Definitions:

Discounting

A financial process used to determine the present value of future cash flows by applying a discount rate, which accounts for the time value of money.

Present Value

The present valuation of a series of future cash inflows or a one-time sum, based on a specified rate of return.

Interest Rate

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan balance.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, considering the time value of money.