Fixed cost

A fixed cost stays the same as output changes over the period being considered. Examples include rent, insurance and a manager’s fixed salary. A bakery must pay its agreed weekly rent even if it produces no cakes that week.

Fixed costs do not change with output. Rent and business rates are examples: producing one extra pot does not increase the monthly rent. Fixed does not mean that a cost can never change; it means that the cost does not vary with output over the period being considered.

Fixed costs do not change as output changes over the period being considered. Examples include rent, insurance and management salaries.