Cost remains constant at all activity levels for which type of costs?

Cost remains constant at all activity levels for which type of costs?

• A. Variable costs
• B. Semi-variable costs
• C. Mixed costs
• D. Fixed costs

Answer: (D)

Fixed costs stay the same in total as activity changes, within the normal operating range. These are costs that don’t vary with output, such as rent, insurance, or salaries of permanent staff. Because the total is constant, the cost per unit falls as more units are produced since you’re spreading the same amount over more output. In contrast, variable costs change in total with output (materials, direct labour), and semi-variable or mixed costs contain both fixed and variable parts, so their total changes with activity rather than staying constant. Therefore, the type of cost that remains constant at all activity levels is fixed costs.

Fixed costs stay the same in total as activity changes, within the normal operating range. These are costs that don’t vary with output, such as rent, insurance, or salaries of permanent staff. Because the total is constant, the cost per unit falls as more units are produced since you’re spreading the same amount over more output. In contrast, variable costs change in total with output (materials, direct labour), and semi-variable or mixed costs contain both fixed and variable parts, so their total changes with activity rather than staying constant. Therefore, the type of cost that remains constant at all activity levels is fixed costs.