Business

Examples of fixed costs

A fixed cost is a cost that does not undergo changes in the short term, even if a company experiences changes in its sales volume or other levels of activity. These types of costs tend to be associated with a period of time, such as a payment of rent in exchange for a month of occupation or the payment of salary in exchange for a couple of weeks of services by an employee.

In any case, below we share some examples of fixed costs in companies

Amortization

It is a fixed cost considered as the gradual charge at the expense of the cost of an intangible asset, such as an acquired patent, during the useful life of said asset.

Depreciation

It is also a gradual burden, but in this case at the expense of the cost of a tangible asset, such as production equipment, over the asset’s useful life.

Insurance payment

These are the fixed costs that the company has contracted, including fire insurance, civil liability insurance or any other that the company considers essential for the development of its activities.

Rental of a premises or office

It is a fixed cost that is paid in a timely manner, generally every month. Regardless of whether or not the company generates profits, this is an expense that must be borne without excuse. For those who are just starting a new business, renting a premises represents a very high fixed cost, but currently you can choose to rent offices by the hour.

Hiring of professionals

This is also another example of fixed costs in companies, which in this case may be costs for the payment of lawyers or consultants, which, as we know, practically all companies hire this type of professional. It is a fixed cost that has become essential to guarantee the evolution of the business and avoid legal conflicts.

Interest expenses

This is an example of fixed costs, which in this case is the cost of funds loaned to a business by a lender. It is considered a fixed cost only if you incorporate a fixed interest rate in the loan agreement.

Property taxes

In this case, it is one of the best known examples of fixed costs, representing the tax charged to a company by the federal or state government, which is based on the cost of the company’s assets.

Wages

It is a fixed cost, considered as the fixed amount of compensation that the company pays to companies for performing their work. This fixed cost can be weekly or biweekly, as established in the employment contract.

Utilities

They are also fixed costs of the company and they include electricity, gas, telephone, etc. Although it is certainly a type of cost that has a variable element, it is largely a fixed cost.

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