What are costs that stay the same despite changes in the activity of the enterprise called?

• A. Variable Costs
• B. Fixed Costs
• C. Direct Costs
• D. Indirect Costs

Answer: (B)

Costs that remain unchanged regardless of the level of activity within an enterprise are known as fixed costs. This means that whether a business produces more or less, these costs do not fluctuate. Examples of fixed costs include rent, salaries of permanent staff, and insurance premiums. They are typically associated with the ongoing expenses that a business must pay even when there is no activity.

On the contrary, variable costs change directly in relation to the level of production or activity. Direct costs are those that can be specifically attributed to a particular product or service, while indirect costs are not directly tied to production and can include overhead and administrative expenses. Understanding fixed costs is crucial for budgeting and financial management, as it helps businesses determine their break-even point and make informed decisions about scaling operations.