Question

Which of the following are fixed costs for a business? Select all correct answers

Group of answer choices

Utilities

Loan Payments

Property Taxes

Production Material

Equipment Rental

Commissions

Ingredients in a cake

Transaction Fees

Answer 1

Which of the following are fixed costs for a business? Select all correct answers ANSWERS IN BOLD BELOW

Fixed costs are those which are repetitive in the nature irrespective of the operations of the business. These could either regular or periodically regular. Eg: Monthly or may be every quarterly or every hadle

Group of answer choices

Utilities YES; These are periodic payments of consumption irrespective of the turnover of the business. If the company is in to Manufacturing, these can be considered as semi-variable (Mixed) costs, as the consumption of electricity (Variable) depends on how many shifts of manufacuting occurs plus tthe consumption of electricity for General & Admin purposes (Fixed);

However, irrespective of the above, these are considered as Fixed costs, as there shall generally be a minimum component of costs to be paid towards utilities irrespective of the consumption.

Loan Payments YES; These are periodic payments of installments (Principal + Interest) irrespective of the turnover of the business.

Property Taxes YES; These are periodic payments of taxes on Property (may be annual or halfyears or quarterly tax payments) irrespective of the turnover of the business.

Production Material NO; These are directly related to the requirement of the manufacture of the products budgeted to meet the demand and supply. Hence, these are considered as Variable costs.

Equipment Rental YES; These are periodic rental payments irrespective of whether used or not in the business, the payments shall need to be made to the Leasing company.

Commissions NO; These are the commssions paid to the agents, sales dealers, etc depending on the sales targets met by them. Hence, these are considered as Variable costs

Ingredients in a cake NO; These are directly related to the requirement of the no.of cakes to bake to meet the demand and supply. Hence, these are considered as Variable costs.

Transaction Fees NO; These are one-time costs made towards completion of an specific transaction and are not recurring in nature. Structuring Fees, Success Fee are examples of these. Hence, these are neither considered as Variable costs nor as Fixed costs. These are one-off exceptional costs.