Transportation Operations LINCS Practice Exam

Which type of cost remains constant regardless of the level of transportation activity?

1. Variable cost

2. Fixed cost

3. Average cost

4. Marginal cost

The correct answer is: Fixed cost

The type of cost that remains constant regardless of the level of transportation activity is fixed cost. Fixed costs are those expenses that do not change with the volume of goods or services produced or transported. Examples of fixed costs in transportation include leases on transport vehicles, salaries of permanent staff, and insurance premiums. These expenses must be paid regardless of whether the transportation operation is fully utilized or only partially operated. In contrast, variable costs fluctuate with the level of activity; they increase or decrease depending on the amount of goods transported, such as fuel costs and maintenance charges. Average costs represent the total cost divided by the number of units produced or transported, which can vary with activity levels. Marginal costs refer to the additional cost incurred when producing one more unit, which also changes based on the level of activity. Thus, fixed costs uniquely maintain their consistency, making them the correct answer to the question.