Fixed Cost

Costs that vary over time rather than in proportion to throughput, e.g. Rent of premises, salaries etc.

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A cost that remains constant regardless of the level of production or sales volume over a specific period. Examples include rent, insurance, salaries of permanent staff, and equipment depreciation.


•   Manufacturing Company: The factory rent of £10,000 per month is a fixed cost because it remains the same whether the company produces 1,000 or 10,000 units.

•   Retail Store: A shop’s monthly rent of £5,000 is a fixed cost because it's incurred even if no goods are sold.

Real-Life Scenario:

A restaurant pays a monthly lease of £3,000 for its premises. Even if the restaurant temporarily closes or experiences a significant drop in customers, the lease payment remains the same.