fixed costs


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Related to fixed costs: Variable costs, direct costs, Semi Fixed Costs

Fixed Cost

An expense that does not change from time period to time period. For example, a company may rent a piece of property for $4,000 per month. A company often prefers to have fixed costs because they reduce uncertainty, but this is not always possible.
Fixed costsclick for a larger image
Fig. 42 Fixed costs. (a) The graph represents total payments made for the use of buildings, plant and equipment, etc., which must be met irrespective of whether output is high or low. (b) The graph represents the continuous decline in average fixed cost as output rises, because a given amount of fixed cost is spread over a greater number of units.

fixed costs

any COSTS that do not vary with the level of output because they are linked to a time base rather than to a level of activity (see Fig. 42). Sometimes called period costs, they include rent and rates and depreciation.
Fixed costsclick for a larger image
Fig. 71 Fixed costs. (a) The graph represents payments made for the use of FIXED FACTOR INPUTS (plant and equipment, etc.) which must be met irrespective of whether output is high or low.

(b) The graph represents the continuous decline in average fixed cost (AFC) as output rises as a given amount of fixed cost is spread over a greater number of units.

fixed costs

any costs that, in the SHORT RUN, do not vary with the level of output of a product. They include such items as rent and depreciation of fixed assets, the total cost of which remains unchanged regardless of changes in the level of activity. Consequently, fixed cost per unit of product will fall as output increases as total fixed costs are spread over a larger output. See Fig. 71 .

In the THEORY OF MARKETS, a firm will leave a product market if in the LONG RUN it cannot earn sufficient TOTAL REVENUE to cover both total fixed costs and total VARIABLE COSTS. However, it will remain in a market in the short run as long as it can generate sufficient total revenue to cover total variable costs and make some CONTRIBUTION towards total fixed costs, even though it is still making a loss, on the assumption that this loss-making situation is merely a temporary one. See MARKET EXIT.

References in periodicals archive ?
Within these sessions we want to identify any clear pattern of change in equilibrium choices as a result of changes in fixed costs.
Rearranging as (P - V)U = FC and divide by (P - V) to isolate U, we get U = FC/(P-V) or fixed costs divided by unit CM.
To illustrate the point: if five of the 10 City XYZ customers take their print work outside, the ISF print shop would have to increase charges to the remaining five customers, because its fixed costs would not be reduced by one-half due to the loss of one-half of its customers and one-half of its work.
The irony is that if management were able to guide the firm to the profit maximizing output level as fixed costs rose through time, DOL would remain equal to zero
Your agency's Form 990 is a good place to find a workable list of expenses (part II), Calculate the percentage of total expenses represented by fixed costs over the past three years.
In the area of staffing, reducing the number of salaried IT professionals and shifting to a model of using more contract labor will move more fixed costs to variable costs while compensation changes - such as putting more pay into the performance-driven category - can also help reduce fixed costs.
It is time that the roles of variable and fixed costs were reversed.
The apparent lack of success of the exchange offer and its anticipated expiration, the deterioration of the price of the company's Common Stock, the cancellation by Eli Lilly and Company of its sponsorship of the company's osteoporosis project, and the company's inability to enter into a new strategic relationship or renegotiate fixed costs, all within the time before expiration of the tender offers has had an adverse effect on the company's ability to succeed with regard to any of those events and made insolvency imminent upon completion of the cash tender offer.
Total costs (TC) are made up of variable costs (VC), which are incurred each time you perform a service (a tongue blade is a variable cost when working up a sore throat), and fixed costs (FC), which are incurred whether you perform any particular service or not (office rent).
This means that for every dollar of new business, 35%would be allocated to covering fixed costs.
As a result of OPPD's increasing debt and fixed costs, the board has pre-approved scheduled retail rate increases over the next several years, to provide investors with the type of financial support they have seen previously.