Which of the following are the best examples of fixed costs?

• A. Rent, truck payment, insurance
• B. Utilities, fuel
• C. Wages, materials
• D. Advertising

Answer: (A)

Fixed costs are expenses that don’t change with how much work you do in the short term. They must be paid whether you complete one job or none. Rent stays the same every month, a truck payment is a fixed loan or lease obligation, and insurance premiums are set payments you owe regardless of activity. In contrast, utilities and fuel vary with usage, wages and materials depend on the amount of work performed and jobs completed, and advertising can shift with campaigns. So the combination of rent, the truck payment, and insurance best represents fixed costs.