A fixed cost is one that tends to remain unchanged IN TOTAL despite changes or fluctuations in activity or output.  For instance, if you are in the business of making “payday” loans, and your office rent is $4,000.00, you owe your landlord $4,000.00 each month if you make 1 loan or 1,000.  Therefore, your monthly rent is a fixed cost.

 

Definition

A cost that does not vary depending on production or sales levels, such as rent, property tax, insurance, or interest expense.


Related Terms

variable cost, total cost, fixed expenses

Related Research Articles from the InvestorGuide.com University

Saving
Have extra money lying around? This article tells you why you should save and how much you should save, with specific emphasis on creating an emergency fund, and when to invest in high-risk, high-return ventures.

Introduction to Budgeting
Learn how to get your financial house in order. Here we describe the overall approach we recommend: choose a system, calculate your current income and expenses and compare the two, set specific goals and monitor your progress as you work toward them.

Goals and Progress
Continuing the discussion of our simple 7 step budgeting process, this article includes information on how to set goals, and consequently how to achieve them.