Panda Express Module 3 Practice Test 2025 – Your Complete Guide to Mastering Module 3!

Fixed costs are expenses that do not change with the level of goods or services produced by a business. These costs remain constant regardless of production output. Insurance is a prime example of a fixed cost because it is typically billed at a regular interval and does not fluctuate with production volume.

In contrast, variable labor costs, sales commissions, and raw material costs change based on the number of products made or sold. Variable labor costs may increase with more hires or hours worked as production ramps up. Sales commissions are directly tied to sales volume, meaning they vary with the number of sales made. Raw material costs fluctuate based on the quantity of materials required for production. Each of these costs is considered variable rather than fixed, as they correlate with production activity and sales performance. Thus, insurance as a fixed cost stands out because it remains stable despite changes in production levels.