1. What is Fixed Cost?

Fixed costs are business expenses that remain constant regardless of production volume or business activity levels. Unlike variable costs, which change with production output, fixed costs stay the same.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• Total Cost — The sum of all business expenses
• Variable Cost — Costs that change with production volume

Explanation: By subtracting variable costs from total costs, we isolate the fixed component of business expenses.

3. Importance of Fixed Cost Calculation

Details: Understanding fixed costs is essential for break-even analysis, pricing strategies, and financial planning. It helps businesses determine their minimum revenue requirements to cover expenses.

4. Using the Calculator

Tips: Enter your total business costs and variable costs in any currency. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What are examples of fixed costs?
A: Common fixed costs include rent, salaries, insurance, and equipment leases - expenses that don't fluctuate with production levels.

Q2: How is fixed cost different from variable cost?
A: Variable costs change with production volume (like raw materials), while fixed costs remain constant regardless of output.

Q3: Why is fixed cost per unit important?
A: Fixed cost per unit decreases as production increases, which is why higher production volumes typically lead to lower per-unit costs.

Q4: Can fixed costs ever change?
A: Yes, but only when business capacity changes (e.g., moving to a larger facility), not due to production volume changes.

Q5: How does fixed cost affect pricing?
A: Businesses must cover fixed costs through their pricing strategy, especially in industries with high fixed costs and low variable costs.