Question

Rotonga Manufacturing Company leases a vehicle to deliver its finished products to customers. Which of the following terms correctly describes the monthly lease payments made on the delivery vehicle?
a.) Direct cost
b.) fixed cost
c.) both direct cost and fixed cost.

Answer 1

Answer:

b.) fixed cost

Explanation:

Fixed cost is a cost which has incurred and does not varies with change in the amount of goods being produced or being sold in the market.

These are expenses are paid by the company

Fixed costs are independent of any business related activities.

Here,

the lease amount is paid once for a vehicle and the lease amount of this truck does not varies with the amount of products company produces.