Question
Which of the following are fixed costs?
Multiple select question.
rent on a production facility
inventory costs
cost of equipment
net working capital
Multiple select question.
rent on a production facility
inventory costs
cost of equipment
net working capital
Answers
GPT-4o mini
Fixed costs are expenses that do not change with the level of production or sales. Based on the options provided, the following are fixed costs:
1. **Rent on a production facility** - This is a fixed cost since it remains constant regardless of production levels.
2. **Cost of equipment** - This is also considered a fixed cost, as it is a one-time expense that does not fluctuate with production levels.
The other two options are not fixed costs:
- **Inventory costs** - These can vary depending on production and sales levels. They are considered variable costs.
- **Net working capital** - This is a measure of a company's short-term liquidity and is not classified as a fixed cost; it can change based on the company's current assets and liabilities.
So, the correct answers are:
- Rent on a production facility
- Cost of equipment
1. **Rent on a production facility** - This is a fixed cost since it remains constant regardless of production levels.
2. **Cost of equipment** - This is also considered a fixed cost, as it is a one-time expense that does not fluctuate with production levels.
The other two options are not fixed costs:
- **Inventory costs** - These can vary depending on production and sales levels. They are considered variable costs.
- **Net working capital** - This is a measure of a company's short-term liquidity and is not classified as a fixed cost; it can change based on the company's current assets and liabilities.
So, the correct answers are:
- Rent on a production facility
- Cost of equipment