Fixed Cost

Fixed Cost – Fixed costs are expenses that remain constant regardless of the level of goods or services produced or sold. These costs do not fluctuate with production volume and are typically associated with time-based obligations or overhead expenses. Key Features: Remain unchanged within a relevant range of production or sales. Often recurring and predictable, such as monthly or annual expenses. Do not directly depend on business output or activity levels. Common Examples of Fixed Costs: Rent for office or factory space. Salaries of permanent employees. Interest payments on loans or mortgages. Depreciation of machinery or equipment.

Key Point: Fixed costs are critical for break-even analysis and pricing decisions, as businesses must cover these costs even if production or sales are low.

Example: A factory pays ₹50,000 monthly rent for its building, regardless of whether it produces 1,000 or 10,000 units of a product. This rent is a fixed cost.