Fixed Cost

Fixed Costs are expenses that do not change even if a company produces more or less. These costs must be paid regularly, making them a stable but unavoidable expense.

They are important in cost analysis, pricing decisions, and break-even calculations.

Examples of Fixed Costs

• Rent or lease payments
• Salaries (permanent staff)
• Insurance premiums
• Depreciation

Fixed Cost vs Variable Cost

• Fixed Cost: Constant (e.g., rent)
• Variable Cost: Changes with production (e.g., raw materials)

Why Fixed Cost Matters

• Helps determine break-even point
• Affects profitability
• Important for budgeting and planning

Advantages

• Predictable expenses
• Easier financial planning

Disadvantages

• Must be paid even during low sales
• Can increase financial risk

"A company pays ₹50,000 monthly rent for its office. This amount remains the same whether production increases or decreases."