Which of the following can be identified as a fixed cost?
A
Labour cost
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B
Electricity bill
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C
Salary of watchman
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D
Cost of raw materials
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Solution
The correct option is C Salary of watchman The terms of a salary is usually negotiated in advance for a specified time period and cant be changed on a daily basis, thus is effectively behaves as a fixed cost as it cant be varied in the short term.