fixed costs


Also found in: Dictionary, Thesaurus, Encyclopedia, Wikipedia.
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 ?
The fixed-cost variances are merely the difference between the actual fixed costs between the two years.
When fixed costs are recovered through variable charges, such as an energy charge per kWh, a cooperative's fixed cost recovery is at the mercy of sales fluctuations due to weather, energy efficiency, conservation or self-generation.
Firstly, investments that may be assigned to a specific customer segment, although still independent of the number of customers, are treated as direct fixed costs (e.g.
The figures in panels 2 and 3 are based on three levels of sales and assume that the C/S ratio and fixed costs remain constant across this range of activity.
These suggestions obviously will not work for all situations, But if we really want to be part of a collaborative supply chain, we need to revisit the way we think about fixed costs, legacy costs, and investment strategy.
After the contribution margin is identified, we would segregate the remainder of the costs into direct and indirect fixed costs. Direct fixed costs can be traced to the cost objects and identified with the objects.
E reviews a sample of receipts, logbooks and invoices annually to estimate the drivers' operating and fixed costs and, correspondingly, to set the percentage of the tag rate paid as a mileage allowance.
The focus of the existing agreement has been on transforming Nokia's fixed IT environment into a flexible, scalable infrastructure while improving service performance and minimizing recurring fixed costs. During the first two years of the relationship, the agreement has delivered significant savings, even exceeding the original target set by Nokia.
M2 EQUITYBITES-July 18, 2019--Volvo plans to decrease fixed costs by SEK2bn
The Woori Financial Research Institute (WFRI) cited the need to reduce annual fixed costs by 900 billion won ($844 million) to salvage the debt-ridden carmaker.
Such fixed costs could include depreciation of production assets; direct labor; project management staff in a project business; and rent and operations costs-such as for running retail outlets like restaurants-along with the accompanying labor costs.