Definition of fixed cost
: cost that remains constant and does not vary with short-term changes in production
Love words? You must — there are over 200,000 words in our free online dictionary, but you are looking for one that’s only in the Merriam-Webster Unabridged Dictionary.
Start your free trial today and get unlimited access to America's largest dictionary, with:
- More than 250,000 words that aren't in our free dictionary
- Expanded definitions, etymologies, and usage notes
- Advanced search features
- Ad free!
Financial Definition of FIXED COST
What It Is
How It Works
Fixed costs are those costs incurred by a company which are unrelated to fluctuations in productivity or sales. Examples of fixed costs include insurance premiums and leases on property. Fixed costs should not be confused with variable costs, which do fluctuate in direct proportion to productivity levels.
Why It Matters
The unchanging nature of fixed costs is beneficial for companies with increasing levels of revenue, because fixed costs allow for quicker marginal profitability at high productivity levels. However, for companies struggling to generate enough revenue to meet obligations, fixed costs can be debilitating.
Seen and Heard
What made you want to look up fixed cost? Please tell us where you read or heard it (including the quote, if possible).