Fixed Costs

Posted in Marketing and Strategy Terms, Total Reads: 3328

Definition: Fixed Costs

The costs incurred by any company can be broken into two main categories:

  • Fixed costs
  • Variable costs

Fixed costs are those costs that do not change with an increase or decrease in the amount of goods or services produced.  They need to be paid by a company whether or not there is any related business activity.

An example of a fixed cost would be a company's lease on a building. The company needs to pay Rs.20,000 each month whether or not there is any other operation.

Some of the examples of fixed costs include:

  • Rent &Tax
  • Wages and salaries
  • Marketing (advertising, market research)
  • Insurance, banking & legal fees
  • Software etc.

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