Commercial Applications
Rent of an office premises is an example of ……………
- Semi-variable Cost
- Semi-fixed Cost
- Fixed Cost
- Variable Cost
Cost
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Answer
Fixed Cost
Reason — Rent of office premises is paid at a fixed amount per month (or per year) regardless of the level of business activity, sales or production. It does not change with the volume of output and remains the same even if production is zero. Hence it is a fixed cost. (Other classic examples of fixed cost include insurance premium, depreciation of plant and managerial salaries.)
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