Which of the following is categorised as fixed cost?
Correct Answer: B
Anorganisation's expense can be categorised into three groups: Fixed Costs - costs that do not change with output. Variable Costs - costs that vary in direct proportion to output. Semi-variable costs - costs that are a combination of the above, with both a fixed and variable element. Among the four options: "Land rental paid in advance": This is fixed cost. The rental won't increase when the production increases. "Additional pallet hires due to higher demand in year-end season": This can be identified as semi-variable cost (or step cost). "Governments taxes": The taxes are often levied by a percentage of income or revenue. Therefore, it is variable "Raw materials for next year production": This is obviously variable cost.
