What are fixed costs?

Fixed costs are defined as expenses that do not fluctuate with changes in production levels or sales volumes. This means that whether a company produces a large quantity of goods or none at all, these costs remain constant over a certain period. Common examples of fixed costs include salaries, rent, insurance, and other overhead costs that are incurred regardless of how much product a business sells. Understanding fixed costs is crucial for businesses as they need to cover these expenses to maintain operations, regardless of production levels.

The other options refer to costs that are not static. For instance, costs that vary with production levels are known as variable costs, which change depending on the output of goods or services. Costs incurred only during peak seasons would suggest a seasonal or variable nature, and costs associated with variable manufacturing would directly relate to production levels and output. Thus, they do not align with the definition of fixed costs, which are predictable and consistent.