Fixed Costs

Overview

Fixed Costs are costs that are incurred once and do not change, regardless of how many units of product is produced. As an example, think of the corporate headquarters, for which a company presumbably only needs one, and for which the cost incurred up front.

Of course, even in this situation, the costs are only relatively fixed. Even if the firm purchased the headquarters at inception, as the company grows, it is likely that it will outcrow the company headquarters.

This would imply that fixed costs are only fixed over a range of production values.