ABC IB Business Management Paper 1 Practice Test

Which is a likely fixed cost for an e-waste factory?

Transport of circuit boards Rent Packaging materials Some energy costs

Correct Answer:

Rent

Explanation:

Fixed costs are expenses that stay the same regardless of how much you produce in the short term. Rent fits this because a factory’s lease is typically a fixed monthly or yearly payment that doesn’t change with the amount of e-waste processed. It’s committed cost you pay whether you operate at full capacity or pause production. In contrast, transport of circuit boards depends on how many boards you move, so it rises with activity. Packaging materials also vary with the number of items. Energy costs usually change with production levels, since more manufacturing uses more electricity, though there can be a small fixed component, the typical expectation is that energy is variable with output.

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