In break-even analysis, which statement about fixed costs is true?

• A. Fixed costs do not vary with output.
• B. Fixed costs increase with output.
• C. Fixed costs are always zero at break-even.
• D. Fixed costs are the same as variable costs per unit.

Answer: (A)

Fixed costs are expenses that do not change with output. In break-even analysis, total cost equals fixed costs plus variable costs, and break-even occurs when revenue just covers both. Because fixed costs stay constant regardless of how much you produce, they do not vary with output. As you increase production, total costs rise only because variable costs increase, while fixed costs remain the same. This is also why fixed cost per unit falls as output grows, since the same total fixed cost is spread over more units. Fixed costs are not zero at break-even; they’re the portion of costs that must be covered regardless of sales. They are not the same as variable costs per unit, which change with the level of output.