Fixed Cost MCQs

Which of the following best defines fixed costs?
a) Costs that vary in direct proportion to the level of production.
b) Costs that remain constant regardless of the level of production.
c) Costs that increase or decrease based on changes in sales volume.
d) Costs that are incurred only in the short run.
Answer: b) Costs that remain constant regardless of the level of production.

Which of the following is an example of a fixed cost?
a) Raw materials used in production.
b) Hourly wages paid to workers.
c) Rent for office space.
d) Marketing expenses.
Answer: c) Rent for office space.

Which statement is true regarding fixed costs?
a) Fixed costs decrease on a per-unit basis as production increases.
b) Fixed costs increase on a per-unit basis as production decreases.
c) Fixed costs are not affected by changes in production levels.
d) Fixed costs are directly proportional to changes in production levels.
Answer: c) Fixed costs are not affected by changes in production levels.

Which of the following is a characteristic of fixed costs?
a) They are always avoidable in the long run.
b) They are incurred only in the short run.
c) They can be easily adjusted based on production levels.
d) They are essential for the operation of a business regardless of the level of production.
Answer: d) They are essential for the operation of a business regardless of the level of production.

Which of the following statements is true regarding the behavior of fixed costs in the long run?
a) Fixed costs decrease as production increases.
b) Fixed costs remain constant regardless of changes in production levels.
c) Fixed costs increase as production decreases.
d) Fixed costs are eliminated in the long run.
Answer: b) Fixed costs remain constant regardless of changes in production levels.

Which of the following is not a characteristic of fixed costs?
a) They do not change with changes in sales volume.
b) They are incurred even if production is zero.
c) They are directly proportional to the number of units produced.
d) They are essential for the operation of a business.
Answer: c) They are directly proportional to the number of units produced.

Which of the following is an example of a fixed cost in a manufacturing company?
a) Cost of raw materials.
b) Cost of direct labor.
c) Depreciation expense on production equipment.
d) Cost of packaging materials.
Answer: c) Depreciation expense on production equipment.

True or False: Fixed costs are often referred to as “overhead costs.”
Answer: True.

Fixed Cost MCQs

Which of the following is a disadvantage of fixed costs?
a) They provide stability in budgeting and planning.
b) They can be easily adjusted based on changes in production levels.
c) They can pose a financial burden during periods of low sales.
d) They are directly linked to variable costs.

Answer: c) They can pose a financial burden during periods of low sales.

Which of the following statements is true regarding fixed costs and total costs?
a) Total costs decrease as fixed costs increase.
b) Fixed costs are a subset of total costs.
c) Total costs are the sum of fixed and variable costs.
d) Fixed costs are not considered in calculating total costs.
Answer: c) Total costs are the sum of fixed and variable costs.

Which cost behavior pattern is associated with fixed costs?
a) Linear.
b) Exponential.
c) Quadratic.
d) Constant.
Answer: d) Constant.

Which of the following is an example of a discretionary fixed cost?
a) Property taxes.
b) Direct labor wages.
c) Utilities expenses.
d) Advertising expenses.
Answer: d) Advertising expenses.

True or False: Fixed costs per unit decrease as production increases.
Answer: True.

Fixed Cost MCQs

Which cost is most likely to be classified as a fixed cost in a retail store?
a) Cost of inventory.
b) Cost of sales commissions.
c) Cost of store rent.
d) Cost of delivery charges.

Answer: c) Cost of store rent.

Which of the following is an example of a committed fixed cost?
a) Marketing expenses.
b) Equipment maintenance costs.
c) Employee training expenses.
d) Travel expenses.
Answer: b) Equipment maintenance costs.

Which of the following statements best describes the impact of fixed costs on the breakeven point?
a) Fixed costs have no impact on the breakeven point.
b) Higher fixed costs result in a higher breakeven point.
c) Lower fixed costs result in a higher breakeven point.
d) Fixed costs only impact the profitability, not the breakeven point.
Answer: b) Higher fixed costs result in a higher breakeven point.

True or False: Fixed costs can be allocated to individual products or services based on their production volume.
Answer: True.

Fixed Cost MCQs

Which of the following is an example of a step-fixed cost?
a) Rent for office space.
b) Utilities expenses.
c) Direct labor wages.
d) Packaging materials.

Answer: a) Rent for office space.

Which cost classification includes both fixed and variable components?
a) Semi-fixed costs.
b) Mixed costs.
c) Incremental costs.
d) Marginal costs.
Answer: b) Mixed costs.

Which cost is typically considered a non-controllable fixed cost by a manager?
a) Advertising expenses.
b) Salary of the production supervisor.
c) Direct material costs.
d) Cost of utilities.
Answer: b) Salary of the production supervisor.

True or False: Fixed costs per unit increase as production decreases.
Answer: True.

Fixed Cost MCQs

Which of the following is an example of a discretionary fixed cost in a service-based business?
a) Rent for office space.
b) Employee salaries.
c) Cost of insurance.
d) Cost of office supplies.

Answer: d) Cost of office supplies.

Which cost is most likely to be classified as a committed fixed cost in a manufacturing company?
a) Cost of training programs.
b) Maintenance and repair expenses.
c) Research and development costs.
d) Lease payments for production equipment.
Answer: d) Lease payments for production equipment.

Which of the following is an example of a capacity-related fixed cost?
a) Cost of shipping products to customers.
b) Cost of raw materials.
c) Depreciation expense on manufacturing equipment.
d) Cost of sales commissions.
Answer: c) Depreciation expense on manufacturing equipment.

True or False: Fixed costs remain constant per unit regardless of changes in the production level.
Answer: True.