Which of the following is an example of a fixed cost?

A fixed cost is an expense that does not change regardless of the level of production or sales. It remains constant over a certain period and does not fluctuate with business activity. Rent for office space is a prime example of a fixed cost because it is generally agreed upon in a lease and stays the same each month, regardless of how much business the company conducts or how many products it sells.

On the other hand, variable costs, such as the cost of materials, fluctuate with production volume—meaning that as more products are produced, these costs increase. Similarly, a utilities bill that varies each month is not fixed because it can change based on consumption, which often correlates with business activity. Lastly, sales commissions are variable costs tied directly to sales performance, and like materials, they increase with more sales, making them inconsistent and reliant on business activity.