Fixed cost is a business term that refers to expenses that do not change as a function of the activity of a business, within the relevant period. These costs are in contrast to variable costs, which vary with the amount of goods or services that a business produces.

For example, a business may pay a fixed cost for rent on its premises. Whether the business makes 100 units of a product or 10,000 units of a product, the rent cost remains the same. Other examples of fixed costs include salaries, insurance, and depreciation.

In the short term, fixed costs cannot be changed, which is why they are "fixed". However, in the long term, these costs can often be adjusted. For example, a business could move to a smaller location to reduce its rent expense.

Question

Fixed cost is a business term that refers to expenses that do not change as a function of the activity of a business, within the relevant period. These costs are in contrast to variable costs, which vary with the amount of goods or services that a business produces.

For example, a business may pay a fixed cost for rent on its premises. Whether the business makes 100 units of a product or 10,000 units of a product, the rent cost remains the same. Other examples of fixed costs include salaries, insurance, and depreciation.

In the short term, fixed costs cannot be changed, which is why they are "fixed". However, in the long term, these costs can often be adjusted. For example, a business could move to a smaller location to reduce its rent expense.

Knowee AI · Accepted Answer

Fixed cost is a business term that refers to expenses that do not change as a function of the activity of a business, within the relevant period. These costs are in contrast to variable costs, which vary with the amount of goods or services that a business produces.

For example, a business may pay a fixed cost for rent on its premises. Whether the business makes 100 units of a product or 10,000 units of a product, the rent cost remains the same. Other examples of fixed costs include salaries, insurance, and depreciation.

In the short term, fixed costs cannot be changed, which is why they are "fixed". However, in the long term, these costs can often be adjusted. For example, a business could move to a smaller location to reduce its rent expense.

Define the term fixed cost

Question

Solution

Similar Questions

Upgrade your grade with Knowee