ACCA Advanced Performance Management (APM) Practice Exam 2025 - Free APM Practice Questions and Study Guide

In the context of cost classification within the short run, fixed costs are those that do not change with the level of production or sales. They remain constant regardless of the output level within that time frame. Rent for the physical location exemplifies a fixed cost because it does not vary based on the number of units produced or sold. A company typically enters into a lease or rental agreement that requires them to pay a set amount regardless of its operational activity.

In contrast, the other options involve costs that can fluctuate with production levels. Labor costs may include both fixed and variable components, but in many cases—such as overtime pay— they can increase with the amount of production. Raw materials are direct costs that increase proportionately with production volume; thus, they are inherently variable. Advertising expenses may also vary over time and be adjusted based on the company’s marketing strategy, making them more flexible rather than fixed. Thus, identifying rent for the physical location as a fixed cost distinctly showcases the nature of costs relevant to production levels in the short run.