Understanding Fixed and Variable Costs

What is a fixed cost?

• A cost that changes every month

• A cost that remains the same every month

• A cost that only occurs once a year

• A cost that depends on the weather

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

• Rent

• Electricity bill

• Mortgage payment

• Car insurance

If your monthly rent is $500, what type of cost is this?

• Variable cost

• Fixed cost

• Occasional cost

• Seasonal cost

Which of the following statements is true about variable costs?

• They are always higher than fixed costs

• They can change based on usage or consumption

• They are paid annually

• They never change

• Fixed cost

• Variable cost

• Annual cost

• One-time cost