The company's expenses that remain fairly stable and do not vary from period to period in response to changes in the degree to which capacity is utilized on the basis of business or sales volume. Examples include salaries, depreciation expense and rent.
Costs that remain invariant with changes in volume of output such as rent, depreciation, wages, insurance and administrative costs. Fixed costs arise as a result of capacity creation and are invariant with respect to variations of activity (capacity utilisation). They are essentially a function of time.
(Hackett, 1998, chapter 6). Those costs that do not vary with the amount a firm produces in the short run. An example is the cost of leasing office space or renting equipment (or owning a boat and traps).
Expenses that are assumed not to vary with sales volume within the expected range of sales volumes, such as rent or administrative costs. This is an important concept in breakeven analysis and in distinguishing between gross margin and contribution margin. See also variable costs.
Costs that a company incurs in making goods regardless of how much it is producing. A firm that manufactures aluminium pipes has to pay for the cost of its factory and machines whether it makes one pipe or 1,000. (See economies of scale.)
are any costs or expenses that do not vary too much with changes in the volume of operations over a specified time. Rent expense is usually considered a fixed expense. However, no cost is fixed over the long term.
Fixed costs are those expenses incurred by a company despite changes in sales. This includes labor and depreciation expenses, as well as interest payments. On the other hand, variable costs are those expenses that change with sales, such as materials purchases and sales commissions. Sales minus fixed and variable costs equals a firm's profits. Consider the case of two companies, both with hypothetical sales of 100 and profits of 10. Even though both firms have profit margins of 10%, Company A has a ratio of variable expenses to sales of 50% and fixed costs of 40. Consequently, if sales drop to 80, Company A can just cover its fixed costs. Company B, on the other hand, has a variable cost ratio of 30% and fixed costs of 60. If its sales drop to 85.7, Company B would be unable to cover its fixed costs. As the example above demonstrates, cutting fixed costs is an important factor in raising a firm's profitability.
Costs that do not vary according to throughput or the amount of service provided. For example, the cost of debt is a fixed cost for a pipeline or an LDC. Pipeline and LDC costs are classified as either fixed or variable. Pipeline rates are generally designed on a two-part basis, with fixed costs covered by a reservation charge and variable costs covered by a commodity charge. A pipeline's average cost for a period of time is very dependent upon the volume for the period of time because a large potion of the pipeline's cost is fixed cost. (Compare with variable cost.) [ coûts fixes
Also called ' Overhead Costs', are those which will not change with a relatively small change in the size of an enterprise though they may change in magnitude over time. Examples are permanent staff wages, interest, insurance and rates. Compare with variable costs. They are unavoidable costs in the short to medium term.
Fixed costs are the running costs that take time to wind down: usually rent, overhead, some salaries. Technically, fixed costs are those that the business would continue to pay even if it went bankrupt. In practice, fixed costs are usually considered the
The expenses of raising a child that are not dependent on whether or not the child is currently in the residence, such as housing. The multiplier used in some parenting time adjustments is based on an estimate of the fixed costs that are duplicated in both households.
These are costs which do not vary directly with size of enterprise. Eg a tractor could be used for growing 300 ha of cereals or 350 ha. Some costs eg fuel are difficult to allocate to enterprises because records are not accurate enough.
Costs that do not vary with a firm's output and must be covered even if the firm is shut down by, say, a storm or a strike. As the volume of business increases, these costs are spread over a larger amount of production, reducing the average cost of each and contributing to economies of scale.