High Fixed Costs
Definition
High fixed costs refer to expenses that do not change regardless of the level of production or sales. These costs are incurred by a business even if it doesn't produce anything.
Analogy
Imagine you have a monthly subscription for a streaming service. Whether you watch one movie or ten movies, the cost remains the same. The fixed cost is like your subscription fee, which stays constant no matter how much you use the service.
Related terms
Variable Costs: Variable costs are expenses that change in proportion to the level of production or sales. They increase as production increases and decrease as production decreases.
Total Costs: Total costs include both fixed and variable costs. It represents the sum of all expenses incurred by a business in producing goods or services.
Break-even Point: The break-even point is the level of production or sales at which total revenue equals total costs. It is when a business neither makes a profit nor incurs a loss.
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