Question

question 14
what is the key difference between fixed costs and variable costs?

fixed costs are only for services, and variable costs are for products.

fixed costs remain constant regardless of production volume; variable costs change.

fixed costs are paid monthly, and variable costs are paid annually.

fixed costs change with production volume; variable costs remain constant.

Explanation:

To determine the key difference between fixed and variable costs, we analyze each option:

• The first option is incorrect because fixed and variable costs apply to both services and products.
• The second option is correct. Fixed costs (e.g., rent) do not change with production volume, while variable costs (e.g., raw materials) change as production volume changes.
• The third option is incorrect as the payment frequency (monthly/annually) is not the defining difference between fixed and variable costs.
• The fourth option is incorrect as it reverses the definitions of fixed and variable costs.

Answer:

B. Fixed costs remain constant regardless of production volume; variable costs change.