What is an example of fixed costs?

Fixed costs are expenses that do not change with the volume of goods or services produced by a business. They remain the same regardless of the level of production or sales. Rent payments are a classic example of fixed costs because they are typically a consistent and recurring expense that a business must pay, irrespective of its operational activity or output levels.

Other options represent variable costs or other financial aspects. Material costs fluctuate based on the volume of production—when production increases, material costs increase as well. Selling prices are the amounts charged to customers and can vary based on market demand. Production overtime relates to additional costs incurred when production exceeds standard working hours, thus being variable in nature based on output needs. This understanding of fixed versus variable costs is crucial in business management for budgeting and financial planning.