Business expenses that remain constant regardless of production volume or sales activity. These costs must be paid whether the company produces one unit or thousands, such as rent, salaries, and insurance.
Emerged in early 20th century accounting as businesses grew more complex and needed to distinguish between costs that varied with production and those that didn't. The term became standard in cost accounting textbooks by the 1930s.
Fixed costs are both a blessing and a curse—they create 'operating leverage' meaning once you cover them, every additional sale drops almost entirely to profit! This is why software companies can be so profitable: their fixed costs are mostly salaries, but serving one more customer costs almost nothing.
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