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First: Fixed costs remain fixed in this sence that it does not concern whether you r doing production or not or how much you are doing production. For example factory building rent... you are paying the rent of the building even if you are making goods or not.
Second: Fixed costs remain fixed for a certain range of production units and after that if you want to increase from that production capacity range this fixed cost also change. For example if you acquire a factory buiding for godown and it has a capacity to story 100 product units so uptill the range of 100 units your fixed cost remain same but when you need to store more units you need to acquire more space and definitely need to pay more rent so now your fixed cost is change but still upto certain range after that range you may need more space and need to pay more rent.
So fixed cost remain fixed upto certain level of activity and after that it changes and become fixed again upto next capacity level of activity.
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∙ 12y ago
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Are fixed costs always irrelevant?
No fixed costs are not always irrelevant. Some fixed costs may differ among the alternatives and hence will be relevant. e.g. When figuring the incremental cost of the more expensive car, the relevant costs would be the purchase price of the new car (net of the resale value of the old car) and the increases in the fixed costs of insurance and automobile tax and license.
What is the importance of fixed costs versus variable costs in making a business profitable?
The importance of knowing which costs are fixed and which costs are very important in making a business profitable. In order to budget effectively, one needs to know costs that will always be the same (fixed) and the ones that sometimes change (variable).
What does fixed costs means?
what does fixed costs mean
Why are Fixed costs also called capacity costs?
Fixed costs are considered capacity costs because if a company expands, fixed costs will change. Additionally, if a company adds more resources, fixed costs will change.
Variable costs are relevant and fixed costs are irrelevant?
Generally variable costs are relevant costs but if due to any decision fixed costs are also going to affected then fixed costs are also relevant costs.
Is utilities a variable costs?
Technically speaking, it is a Fixed cost. Although the price may vary from month to month, it will always be within a fixed range.
Is fixed costs is a period costs?
Yes normally fixed costs are period costs because these costs have to be paid no matter production done or not.
What happens to sales when fixed costs decrease?
When fixed costs decrease, what does this do for sales?
Fixed costs are those costs which are?
Fixed costs are assigned to all products. Variable costs are assigned only to the product that led to the cost.
What is the difference between escapable and unavoidable cost?
Avoidable or escapable costs are those costs which can be avoided by stop doing or start doing any particular activity and unavoidable costs are those costs which cannot be avoidable whether activity is done or not.For Example all variable costs are avoidable costs and fixed costs are unavoidable costs but this is general criteria to explain but not always all fixed costs are unavoidable.
When Jackie's hot dogs stand sells 500 hot dogs it has totally fixed costs of 200 and total variable cost of 400 what are Jackie's hot dogs stand's fixed costs when they sell 1000 hot dogs?
Fixed costs are called fixed for a reason, no matter how many hot dogs Jackie sells, she will still have the $200 of fixed costs. An example of a fixed cost that she can have is a permit for selling food from a stand. If the permit cost $200 she will always have to pay that $200, even if she sold absolutely no hot dogs. Variable costs tend to fluctuate depending on the amount of products she produces. As for your question, if you haven't thought of an answer this far, Jackie's fixed costs are $200.
Why are committed fixed costs the most difficult of fixed costs to change?
Some committed fixed costs are the most difficult of fixed costs to change because they are required to maintain basic operations. For example, rent is a fixed cost that is difficult to change because it is bound by a lease.
