Utah Contractor Practice Exam

Which of the following are exemplary fixed costs?

1. Rent, truck payment, insurance

2. Advertising, office supplies, equipment maintenance

3. Mortgage, fuel, utilities

4. Rent, utilities, equipment maintenance

The correct answer is: Rent, truck payment, insurance

Fixed costs are expenses that do not change with the level of goods or services produced by a business; they remain constant regardless of the operations' volume. This includes costs that are typically recurring and predictable over time. In this case, rent, truck payment, and insurance are all examples of fixed costs. Rent is a standard obligation that remains the same regardless of how many products are produced or services rendered. Truck payments are usually structured in a way that outflows are fixed over the life of the loan or lease agreement, hence they are predictable and consistent. Insurance premiums, likewise, are charged at regular intervals and do not fluctuate with the business activity level. The other options contain variable costs or mixed costs, which can change based on production levels. For instance, advertising can vary widely based on campaign decisions and sales goals, office supplies may fluctuate depending on operational needs, and equipment maintenance can be more unpredictable. Similarly, mortgage payments can include variable components, and utilities are often proportional to usage, reflecting fluctuating costs rather than fixed ones. Therefore, the selection of rent, truck payment, and insurance aligns with the characteristics of fixed costs, making it the most appropriate answer in identifying exemplary fixed costs.