Which costs are classified as fixed costs?

Fixed costs are those expenses that do not change with the level of production or sales over a certain range. They remain constant regardless of how much a business produces. Typical examples include rent, salaries of permanent staff, and insurance premiums. Therefore, the identification of costs like rent as fixed costs is accurate because these expenses must be paid regardless of the business's operational output.

In contrast, costs that vary with production levels, such as raw materials or certain types of salaries like overtime pay, are considered variable costs. Additionally, marketing expenses that fluctuate with sales are also variable, as they are often tied directly to the level of sales activity. Thus, recognizing costs that remain constant, such as rent, as fixed costs highlights their essential role in budgeting and financial planning for a business.