Which type of costs remain constant irrespective of changes in a firm's activity level?

Fixed costs are expenses that do not fluctuate with the level of output or activity within a business. Regardless of how much a company produces or sells, fixed costs remain unchanged. Examples of fixed costs include rent, salaries, insurance, and property taxes. These costs are essential for maintaining the business's operations and are incurred even if production levels drop to zero.

The significance of distinguishing fixed costs from variable costs is crucial in financial management and planning. While variable costs, such as materials and labor, change in direct relation to production levels, fixed costs are incurred irrespective of production volume, providing a stable financial framework for a company's budget and cost forecasting.

Understanding fixed costs is essential for managers in making decisions about pricing, budgeting, and long-term financial planning, as these costs affect a firm's break-even point and overall profitability.