Fixed Cost
Also called: fixed costs, fixed expense
What is Fixed Cost?
Fixed costs are the expenses that do not change with sales volume within a given period — rent, licence fees, insurance, core salaries, internet and the accountant's retainer. They accrue whether the shutter is up or down.
Why Fixed Cost matters
Fixed costs set the height of the bar every month. They determine break-even, they are what makes a slow month painful, and they are the reason volume matters so much in low-margin trades.
How Fixed Cost works in practice
List them once and total them monthly. Anything that arrives as an annual bill should be divided by twelve so the monthly picture is honest rather than lumpy.
Worked example
₹1,20,000 rent, ₹2,00,000 salaries and ₹30,000 of utilities and licences mean ₹3,50,000 of contribution is needed before any profit exists.
Frequently asked questions
Core staff are fixed; extra shift hands hired for busy weekends behave as variable costs.