Multiple Choice
Each of the following events results in a tax payment. Which is an example of a direct tax?
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1. Introduction to Accounting
Types of Accounting
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Which of the following is NOT an example of a fixed expense?
A
Depreciation expense
B
Monthly rent payment
C
Insurance premium paid annually
D
Utility bill based on usage
Verified step by step guidance1
Understand the concept of fixed expenses: Fixed expenses are costs that remain constant over time, regardless of the level of activity or usage. Examples include rent, insurance premiums, and depreciation.
Analyze each option provided in the question: Depreciation expense, monthly rent payment, and insurance premium paid annually are all fixed expenses because they do not vary with usage or activity levels.
Consider the utility bill based on usage: Utility bills are variable expenses because they fluctuate depending on the amount of usage (e.g., electricity, water, or gas consumption).
Compare fixed and variable expenses: Fixed expenses are predictable and consistent, while variable expenses change based on activity or usage. This distinction helps identify which option does not belong in the fixed expense category.
Conclude that the utility bill based on usage is NOT a fixed expense, as it varies depending on consumption, unlike the other options listed.
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