FIXED COST Meaning and
Definition
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Fixed cost refers to the expenses incurred by a business that do not fluctuate with changes in the level of production or sales. It is a cost that remains constant regardless of the volume of goods or services produced and sold. Fixed costs are considered as the basic operating expenses of a company that need to be paid regularly to sustain its operations.
Typical examples of fixed costs include rent or lease payments for the company's premises, insurance premiums, property taxes, salaries of permanent employees, utilities such as electricity and water bills, and annual maintenance contracts for equipment. These costs are necessary for the functioning of the business and are not directly related to the quantity of output.
In accounting and financial analysis, fixed costs are often contrasted with variable costs, which are expenses that vary depending on the level of production or sales. Fixed costs are seen as relatively stable and predictable since they usually do not change significantly in the short-term. However, fixed costs may change over the long-term if the business expands or contracts its operations.
Understanding fixed costs is crucial in determining the break-even point for a business, i.e., the point at which total revenue equals total costs. By identifying and managing fixed costs effectively, businesses can make informed decisions on pricing, production levels, and overall cost control, ultimately improving their profitability and sustainability.
Common Misspellings for FIXED COST
- dixed cost
- cixed cost
- vixed cost
- gixed cost
- tixed cost
- rixed cost
- fuxed cost
- fjxed cost
- fkxed cost
- foxed cost
- f9xed cost
- f8xed cost
- fized cost
- ficed cost
- fided cost
- fised cost
- fixwd cost
- fixsd cost
- fixdd cost
- fixrd cost
Etymology of FIXED COST
The word "fixed cost" comes from the combination of two separate terms: "fixed" and "cost".
- "Fixed" is derived from the Latin word "fixus", which means "fastened" or "attached". In this context, it refers to something that is unchanging, steady, or stable.
- "Cost" comes from the Latin word "costus", which means "expenditure" or "expense". It is directly related to the concept of price or value associated with acquiring or producing something.
When the two terms are combined, "fixed cost" refers to an expenditure or expense that remains constant within a certain period or level of production, regardless of the changes in other variables like output or sales volume.
Similar spelling words for FIXED COST
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