Which best describes the concept of fixed costs?

The concept of fixed costs is best described as expenses that remain constant regardless of production levels. This means that these costs do not fluctuate with the quantity of goods or services produced. Examples of fixed costs include rent, salaries of permanent staff, and insurance. These costs are incurred whether a company produces a large volume or none at all.

In contrast, costs that change based on sales volume are considered variable costs, which increase or decrease depending on the output level. Fixed costs may also include items that are necessary for the overall operation of the business and do not change with production rates, ensuring that the business can continue to function regardless of sales performance. This stability allows businesses to plan and budget effectively over time.