Variable vs. Fixed Costs in Production

Steps:

• Recall that variable costs change directly with production volume, while fixed costs remain constant regardless of output.
• Examine each option to see if it fluctuates with the level of goods produced.
• Identify costs tied to production activity as variable and those independent as fixed.
• Select the option that does not vary with output.

Why D is correct:

• Rent of offices is a fixed cost, as defined in cost accounting, remaining unchanged irrespective of production levels.

Why the others are wrong:

• A: Raw materials increase with more units produced, making it variable.
• B: Fuel usage rises with higher production, classifying it as variable.
• C: Extra pay for overtime directly correlates with additional production hours, so it's variable.

Final answer: D