{"id":271682,"date":"2023-12-11T13:18:37","date_gmt":"2023-12-11T01:18:37","guid":{"rendered":"https:\/\/www.reckon.com\/nz\/?page_id=271682"},"modified":"2025-01-29T09:55:48","modified_gmt":"2025-01-28T21:55:48","slug":"fixed-cost","status":"publish","type":"glo","link":"https:\/\/www.reckon.com\/nz\/glossary\/fixed-cost\/","title":{"rendered":"What is a fixed cost?"},"content":{"rendered":"<p>[et_pb_section fb_built=&#8221;1&#8243; custom_padding_last_edited=&#8221;off|desktop&#8221; _builder_version=&#8221;4.27.2&#8243; custom_margin=&#8221;0px||0px||false|false&#8221; custom_padding=&#8221;0px||0px||false|false&#8221; custom_padding_phone=&#8221;0px||||false|false&#8221; locked=&#8221;off&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_row column_structure=&#8221;1_3,2_3&#8243; _builder_version=&#8221;4.27.2&#8243; background_size=&#8221;initial&#8221; background_position=&#8221;top_left&#8221; background_repeat=&#8221;repeat&#8221; width=&#8221;100%&#8221; custom_margin=&#8221;0px||0px||false|false&#8221; custom_padding=&#8221;0px||0px||false|false&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;1_3&#8243; module_class=&#8221;table-contents&#8221; _builder_version=&#8221;4.23&#8243; background_color=&#8221;#f4f4f4&#8243; custom_padding=&#8221;25px||25px||true|false&#8221; sticky_position=&#8221;top&#8221; sticky_limit_bottom=&#8221;section&#8221; sticky_position_tablet=&#8221;top&#8221; sticky_position_phone=&#8221;none&#8221; sticky_position_last_edited=&#8221;on|desktop&#8221; pac_dcm_carousel_specific_module_num=&#8221;0&#8243; border_radii=&#8221;on|24px|24px|24px|24px&#8221; global_colors_info=&#8221;{}&#8221; custom_padding__hover=&#8221;|||&#8221;][et_pb_text _builder_version=&#8221;4.23&#8243; text_font=&#8221;||||||||&#8221; global_colors_info=&#8221;{}&#8221; background__hover_enabled=&#8221;on|desktop&#8221;][\/et_pb_text][\/et_pb_column][et_pb_column type=&#8221;2_3&#8243; _builder_version=&#8221;4.16&#8243; custom_padding=&#8221;|||&#8221; pac_dcm_carousel_specific_module_num=&#8221;0&#8243; global_colors_info=&#8221;{}&#8221; custom_padding__hover=&#8221;|||&#8221;][et_pb_text admin_label=&#8221;Definition description&#8221; _builder_version=&#8221;4.27.4&#8243; header_2_font_size=&#8221;32px&#8221; header_2_font_size_tablet=&#8221;30px&#8221; header_2_font_size_phone=&#8221;26px&#8221; header_2_font_size_last_edited=&#8221;on|tablet&#8221; global_colors_info=&#8221;{}&#8221;]Fixed costs are stable business expenses. They are set by time, rather than production. Regardless of their business type, business owners must understand their fixed costs so that they can make <a href=\"https:\/\/www.reckon.com\/reckon-blog\/the-psychology-of-money-how-your-mindset-affects-your-financial-decisions\/\">wise decisions<\/a>.<br \/>\n<\/br><\/p>\n<h2>Fixed cost (definition)<\/h2>\n<p>A fixed cost (also known as an indirect or overhead cost) is an <a href=\"https:\/\/www.reckon.com\/nz\/glossary\/expense\/\" data-wpil-monitor-id=\"8\">expense<\/a> that doesn\u2019t change from one month to another. A fixed cost is not impacted by how busy the business is, or by production volume or sales or. \u00a0It is a stable business expense. (Without producing anything or making any sales, fixed costs are still incurred.)[\/et_pb_text][et_pb_image src=&#8221;https:\/\/www.reckon.com\/nz\/wp-content\/uploads\/2024\/08\/fixed-cost.png&#8221; alt=&#8221;Working Capital Definition&#8221; title_text=&#8221;Fixed Cost&#8221; align=&#8221;center&#8221; admin_label=&#8221;Image&#8221; _builder_version=&#8221;4.27.0&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][\/et_pb_image][et_pb_text admin_label=&#8221;Definition description + related terms&#8221; _builder_version=&#8221;4.27.4&#8243; header_2_font_size=&#8221;32px&#8221; header_2_font_size_tablet=&#8221;30px&#8221; header_2_font_size_phone=&#8221;26px&#8221; header_2_font_size_last_edited=&#8221;on|tablet&#8221; global_colors_info=&#8221;{}&#8221;]<\/p>\n<h2>Examples of fixed costs<\/h2>\n<p>Examples of fixed costs include:<\/p>\n<ul>\n<li>rent<\/li>\n<li>salaries<\/li>\n<li>internet and phone bills<\/li>\n<li>insurance<\/li>\n<li>some utilities<\/li>\n<li><a href=\"https:\/\/www.reckon.com\/nz\/small-business-resources\/business-financing\/small-business-financing\/\">loan repayments<\/a><\/li>\n<li>property taxes<\/li>\n<\/ul>\n<h2>What is a variable cost?<\/h2>\n<p>Variable costs are those expenses that will change in direct relation to business activity, sales, and production.<\/p>\n<p>While fixed and variable costs are both expenses, as the name suggests, fixed costs don\u2019t change in response to production or sales, whereas variable costs do.<\/p>\n<p>Variable costs can include:<\/p>\n<ul>\n<li>raw materials<\/li>\n<li>inventory or stock<\/li>\n<li>packaging<\/li>\n<li>shipping fees<\/li>\n<li>direct labour.<\/li>\n<\/ul>\n<p><strong>See related terms<\/strong><\/p>\n<ol>\n<li><a href=\"https:\/\/www.reckon.com\/nz\/glossary\/marginal-cost\/\">What is marginal cost?<\/a><\/li>\n<li><a href=\"https:\/\/www.reckon.com\/nz\/glossary\/fixed-assets\/\">What are fixed assets? <\/a><\/li>\n<li><a href=\"https:\/\/www.reckon.com\/nz\/glossary\/cash-flow\/\">What is cash flow?<\/a><a href=\"https:\/\/www.reckon.com\/nz\/glossary\/fixed-assets\/\"><br \/><\/a><span style=\"font-size: 16px; letter-spacing: -0.15px;\">\u00a0<\/span><\/li>\n<\/ol>\n<p>[\/et_pb_text][ba_social_share icon_bg=&#8221;#03002e&#8221; icon_padding=&#8221;10px|12px|10px|12px|true|true&#8221; layout=&#8221;classic&#8221; show_text=&#8221;off&#8221; btn_padding=&#8221;0px|0px|0px|0px|false|false&#8221; btn_bg_color=&#8221;RGBA(255,255,255,0)&#8221; _builder_version=&#8221;4.23&#8243; _module_preset=&#8221;default&#8221; custom_margin=&#8221;50px||||false|false&#8221; custom_padding=&#8221;25px||||false|false&#8221; custom_css_before=&#8221;    content: %22SHARE THIS%22;||    font-size: 16px;||    font-weight: 700;||    line-height: 22px;||    letter-spacing: 0em;||    text-align: center;||    color: #ff5447;||    margin-bottom: 10px;||    display: inline-flex;||    position: absolute;||    margin-top: 10px;&#8221; border_width_top_main=&#8221;1px&#8221; border_color_top_main=&#8221;#e4e4e4&#8243; border_radii_icon=&#8221;on|5px|5px|5px|5px&#8221; global_colors_info=&#8221;{}&#8221; custom_css_before_last_edited=&#8221;off|desktop&#8221;][ba_social_share_child _builder_version=&#8221;4.23&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][\/ba_social_share_child][ba_social_share_child network_type=&#8221;facebook&#8221; _builder_version=&#8221;4.23&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][\/ba_social_share_child][ba_social_share_child network_type=&#8221;linkedin&#8221; _builder_version=&#8221;4.23&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][\/ba_social_share_child][ba_social_share_child network_type=&#8221;email&#8221; _builder_version=&#8221;4.23&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][\/ba_social_share_child][\/ba_social_share][\/et_pb_column][\/et_pb_row][\/et_pb_section]<\/p>\n","protected":false},"excerpt":{"rendered":"<p><!--TOC-->Fixed costs are stable business expenses. They are set by time, rather than production. Regardless of their business type, business owners must understand their fixed costs so that they can make wise decisions. 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