fixed cost investment & finance definition
A
cost that is constant regardless of the level of sales or production. For
instance, in a manufacturing plant, expenses such as rent, depreciation, and
insurance must be paid even if the factory closes down for a two-week period.
Fixed costs contrast with variable costs, such as temporary labor or materials
that are used to produce goods, which vary depending on the level of sales or
production.
See fixed cost in Wall Street Words
A cost that remains unchanged even with variations in output. An airline with 20 airplanes has the fixed costs of depreciation and interest (if the planes are partially financed with debt), regardless of the number of times the planes fly or the number of seats filled on each flight. Firms with high fixed costs tend to engage in price wars and cutthroat competition because extra revenues incur little extra expense. These firms tend to experience wide swings in profits. Compare
variable cost.
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