Which of the following is a fixed cost for a tire manufacturing business?

• A. Electricity costs that vary with production levels
• B. Monthly rent for the factory building
• C. Raw materials used in tire production
• D. Wages paid to production workers

Answer: (B)

Verified step by step guidance

1. Understand the definition of fixed costs: Fixed costs are expenses that do not change with the level of production or output. They remain constant regardless of how much is produced.
2. Identify the nature of each cost option: Electricity costs that vary with production levels are variable costs because they change as production changes.
3. Raw materials used in tire production are variable costs since the amount used depends directly on the number of tires produced.
4. Wages paid to production workers are typically variable costs if they are paid based on hours worked or output, as they fluctuate with production levels.
5. Monthly rent for the factory building is a fixed cost because it must be paid regardless of how many tires are produced, making it independent of production volume.