PRC-3 · Chapter 12 · Question 33 of 69
A company must pay a Rs. 500,000 annual lease for its warehouse regardless of whether it produces a million units or completely shuts down operations. This expense is classified as a:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Fixed cost
Explanation
Fixed costs are overhead expenses that remain totally unchanged regardless of the level of output produced. They must be paid even at zero production.
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