What is a common example of a fixed cost related to business operations?

What is a common example of a fixed cost related to business operations?

• A. Packaging materials
• B. Labor costs
• C. Property tax
• D. Raw materials

Answer: (C)

A common example of a fixed cost in business operations is property tax. Fixed costs are expenses that do not change with the level of production or sales activity; they remain constant over a specific period regardless of the company's output. Property taxes are typically assessed annually and must be paid regardless of how much or how little a business produces or sells. In contrast, options related to packaging materials and raw materials are variable costs because they fluctuate based on the level of production. Labor costs can also be variable, especially if they are tied to hourly wages or overtime that depend on production levels. Therefore, property tax stands out as a clear example of a fixed cost, as it represents a consistent financial obligation that the business must pay regardless of its operational scale.

A common example of a fixed cost in business operations is property tax. Fixed costs are expenses that do not change with the level of production or sales activity; they remain constant over a specific period regardless of the company's output. Property taxes are typically assessed annually and must be paid regardless of how much or how little a business produces or sells.

In contrast, options related to packaging materials and raw materials are variable costs because they fluctuate based on the level of production. Labor costs can also be variable, especially if they are tied to hourly wages or overtime that depend on production levels. Therefore, property tax stands out as a clear example of a fixed cost, as it represents a consistent financial obligation that the business must pay regardless of its operational scale.