To improve productivity, a local bakery rents a machine that mixes, partitions, and then bakes dough for a variety of pastries. The machine costs the business $2,500 per month to rent and operate, regardless of output. The cost of renting the machine is classified as _____.

Answer 1

The cost of renting the machine is classified as a fixed cost. Fixed costs are expenses that do not change with the level of production or output; they remain constant regardless of how much product is made or sold. In this case, the bakery incurs the same cost of $2,500 per month for the machine, irrespective of the quantity of pastries they produce.