Glossary definition

What is fixed cost?

Fixed cost

Fixed costs are the costs a company incurs regularly regardless of production quantity or revenue. The general fixed cost definition includes any costs that are consistent within a company’s normal operations. These include any regularly paid and nonfluctuating insurance premiums, property taxes, rent or lease agreements and consistent annual salaries paid to employees.

To calculate fixed cost: add together all fixed, recurring expenses outlined above.

The implication of high fixed costs for a company is a demand for similarly high production output or revenue to maintain profitability. Fixed cost is paired with its opposite, variable cost, in evaluating the total cost structure of a company.

The 6 stages of smarter money management

Discover what successful business owners from all over the world do to win at small business finances during every stage of their journey.

Download Guide

Subscribe to the Sage Advice Blog

Get our latest business advice direct to your inbox.