Which of the Following Costs Would Be a Fixed Cost

question 4

Multiple Choice

Which of the following costs would be a fixed cost for Shaun, a knitwear manufacturer?

• A) Purchasing wool
• B) Labour cost: knitting machine operators
• C) Factory rent
• D) Labels and packaging

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Definitions:

Process Costing System

A process costing system is an accounting method used to allocate costs to units of product in continuous or repetitive processes, suitable for industries producing homogeneous products.

Conversion Costs

Conversion costs are manufacturing expenses incurred in converting raw materials into finished products, including direct labor and manufacturing overhead.

First-In, First-Out

An inventory valuation method where the oldest inventory items are recorded as sold first.

Process Costing System

A method used in accounting and management to assign production costs to units of output, typically used for processes that produce large quantities of similar items.