A fixed cost is a business expense that stays the same regardless of how much you produce or sell, such as rent, insurance and salaried wages.
Fixed costs do not change with output in the short term, you pay the same rent whether you sell one unit or a thousand. They contrast with variable costs, which rise and fall with production. Most overhead is fixed, while materials and hourly labour tend to be variable.
The mix of fixed and variable costs drives a business's break-even point and its risk profile. High fixed costs mean higher break-even but greater profit once past it (operating leverage); low fixed costs mean a lower break-even but thinner upside per sale.
A bakery pays $4,000 monthly rent (fixed) regardless of how much bread it sells, while flour and packaging (variable) rise with each loaf produced. Together they determine how many loaves it must sell to break even.
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