The fixed costs are those costs that are not proportionally related to the amount of production or sale carried out by a certain company without variations from one period to another.
They are costs that must be included within the fixed classification, since they must be paid obligatorily, regardless of the amount of sales that occurs monthly, semi-annually or annually.
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By keeping track of the fixed costs, it is essential to be able to determine the prices of the products or services that a company wants sell and thus not have a loss, which could happen if the costs exceed the income.
In this article you will find:
Characteristics of the fixed costs
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Within the fixed costs, some characteristics such as the following can be mentioned:
- Fixed costs are the payments that companies must pay, regardless of their level of production or sale.
- They are known as fixed, since they do not have any type of variance in the changes generated in the production of goods or services.
- They are those that, regardless of the amount of production, must always be paid as is the case with salaries, taxes, rentals, Internet, insurance, telephony and other services.
- Fixed costs do not vary, since the company cannot postpone or avoid the expenses that are essential to carry out the various activities of the company or business.
- These types of costs can be maintained in a specific time, without depending on the amount of production, therefore, if there is a high or low level of production, the fixed cost of the company.
- Mostly these costs are paid monthly and can be modified in the future depending on the needs of the company.
Fixed cost classification
There are two types of fixed costs, which are:
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- Committed: They are those who have the possibility of not undergoing any type of modifications, since if this happened it would significantly affect production.
- Discretionary: These are those that can be reduced without affecting the company's production.
How fixed costs are calculated
It is very easy to do the calculations of the fixed costs, you just have to make a list of all the expenses that usually comprises the company or business, which have nothing to do with the expenses generated in a production for the sale.
Examples of fixed costs
Fixed costs is the price that should not be stopped paying, regardless of whether it is a worker or a seller of products or services. There are a lot of examples of fixed costs that are generally applied in companies or businesses, these are the following:
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1. Employee salary
It is about the payment of wages that the company or business must pay its workers, regardless of whether or not they work on a particular day.
2. Insurance
It is the payment invested in civil liability, vehicles, workplace accidents and fire, among others, for the safety of the company or business and the social security of the employees.
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3. Rentals
These are payments for office, warehouse or premises rental contracts for the operation of the company or business.
4. Banking services
These are the expenses generated by the various services and financing provided by the banking entities to the companies.
5. Repairs
In the event of an unforeseen event, a type of maintenance repair must be done, to repair some machinery or If something happens at the company's facilities, this is a payment that the company must make even if it has to be closed.
6. Advertising
Companies must always make advertising investments to become known or simply stay in the market, therefore investing in objects advertising, commercial spots either on radio or television, billboards, press announcements or on social networks such as Facebook, Instagram, Google, among others.
7. Taxes
The payment of local and regional taxes are mandatory fixed costs of every company or business.
8. Transport
This is an essential expense for travel for work.
9. Supplies
These are payments for water, electricity, telephone and heating services, which are necessary for all types of businesses or companies.
10. Amortization
These are the promotional investments that companies spend every year.
11. Professional services
This is a fixed cost, since companies must invest in accounting advisers, external financial directors, IT personnel, trainers, prosecutors and lawyers, among others.
12. Other expenses
It is about unforeseen expenses that companies or businesses do not find location for.
Fixed costs must be paid, regardless of the amount of production of the company, enterprise or business, this means that even if they spend months without producing and not making a profit, they will always have to to pay.
