Question
Fixed costs change depending on the volume of production. True False
Answer
4.2
(246 Votes)
Aurora
Veteran · Tutor for 9 years
Answer
False
Explanation
The statement provided in the question can be seen as incorrect from a standard economic perspective. In economics and cost accounting, fixed costs are business expenses that are not dependent on the level of goods or services produced by the business. They tend to be time-related, such as a monthly rental payment, annual insurance, or a yearly payment staff. Changes in the production level or volume do not directly influence these costs. Hence, the very feature that distinguishes fixed costs is their non-coincidence with the volume of production, output, or level of activity of any kind. To reiterate, fixed costs will remain the same, irrespective of the firm's level of output - until there is some degree of operational restructuring, or changes to the firm's economic or financial condition, among other outliers.