Which term is used to describe costs that do not change with production levels?

The term that describes costs that do not change with production levels is fixed costs. These costs remain constant regardless of the volume of goods or services produced. Examples of fixed costs include rent, salaries, and certain utilities.

Understanding fixed costs is vital for budgeting and financial planning, as they contribute to the overall cost structure of a business. Since fixed costs do not fluctuate with production levels, they can be spread over larger production volumes, potentially reducing the per-unit cost as output increases. This stability allows businesses to predict certain financial obligations more easily, which is essential for long-term strategic planning and management.

In contrast, variable costs fluctuate in direct relation to production levels. Direct costs are specifically attributable to a particular cost object, such as a product or service, and discretionary costs are expenses that can be altered or eliminated in the short term based on management decisions. Thus, variable, direct, and discretionary costs do not inherently represent the stability associated with fixed costs.