What are fixed costs?

When the production costs of goods and services are calculated, there are costs that are linked to the production process of each product or service, these costs are called variable costs, in that they are increased or decreased depending on the number of units produced. However, there are other types of costs that are transversal in nature, they are of course linked to the business or business activity, but not directly to the production process. Therefore, they are independent of the number of units produced. These types of costs are called fixed costs, and they should also be part of the cost of each product or service.

The way to determine the amount of fixed costs to be attributed to each unit of product or service is simply to add the fixed costs, or each type of fixed cost, and divide them by the number of units produced. Fixed costs are also those expenses incurred by the business or company, in the event that it does not produce anything. A typical example may be the rental of the industrial warehouse, which has to be paid regardless of whether the company's staff is on vacation or working, for example.

The ideal for any company is to have the lowest possible fixed costs. In this sense, the Internet and new technologies are making it possible to reduce the fixed costs of any business to the maximum, which, in this case, are limited to domain, the hosting, what they charge us for the website, which today we can easily do ourselves, and little else. Another way to reduce fixed costs is to tend to work on request, thus having a zero cost of stocks.

Examples of fixed costs

Fixed costs are considered:

  • The Supplies, for example, telephony or Internet
  • The price of the leases
  • Salaries and salaries from the workers
  • The maintenance expenses contracted under the equal
  • Office supplies
  • Administrative and selling expenses
  • Interest on financial obligations

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