The correct answer is A. Fixed cost.
A setup cost is a cost that is incurred every time a production run is started. It is a fixed cost because it does not vary with the number of units produced. For example, the cost of setting up a machine to produce a new product is a fixed cost. The cost of setting up a machine to produce a new batch of a product is also a fixed cost.
A variable cost is a cost that varies with the number of units produced. For example, the cost of raw materials is a variable cost. The more units that are produced, the more raw materials are needed.
A semi-variable cost is a cost that has both fixed and variable components. For example, the cost of electricity is a semi-variable cost. The cost of electricity is fixed for a certain level of usage. However, if the usage exceeds that level, the cost of electricity increases.
A carrying cost is a cost that is incurred to hold inventory. For example, the cost of storage space is a carrying cost. The cost of insurance is also a carrying cost.
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