Fixed costs in a contracting business typically include which of the following?

Fixed costs in a contracting business typically include which of the following?

• A. Wages
• B. Materials
• C. Rent
• D. Fuel

Answer: (C)

Fixed costs are the expenses you pay regardless of how much work you have. In a contracting business, rent is paid as a regular lease payment whether you have one job or many, so it stays constant from month to month. Wages typically change with hours worked or crews assigned, making them variable with activity. Materials and fuel also vary with the amount of work and travel you undertake, so they are variable costs. Because rent remains the same no matter how much business you generate, it is the classic fixed cost.

Fixed costs are the expenses you pay regardless of how much work you have. In a contracting business, rent is paid as a regular lease payment whether you have one job or many, so it stays constant from month to month. Wages typically change with hours worked or crews assigned, making them variable with activity. Materials and fuel also vary with the amount of work and travel you undertake, so they are variable costs. Because rent remains the same no matter how much business you generate, it is the classic fixed cost.