ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Fixed costs tend to be costs that are based on time rather than the quantity produced or sold by your business. Examples of fixed costs are rent and lease costs, salaries, utility bills, insurance, and loan repayments. Some kinds of taxes, like business licenses, are also fixed costs.

Detailed explanation-2: -Fixed costs are important because they can help you determine the current and future financial needs of a company. When you lower your fixed costs, your expenses may decrease and your profits may increase. In turn, this can increase your profit margin.

Detailed explanation-3: -Why fixed costs matter. Fixed costs don’t change much from week to week or month to month. That means it’s relatively simple to predict and budget for them. The higher fixed costs are, the more sales a business has to make in order to break even.

Detailed explanation-4: -Companies incur two types of production costs: variable and fixed costs. Variable costs change based on the amount of output produced. Variable costs may include labor, commissions, and raw materials. Fixed costs remain the same regardless of production output.