fixed cost: meaning, definition, pronunciation and examples
B2Formal / Technical (primarily Business & Economics)
Quick answer
What does “fixed cost” mean?
A business expense that does not change with the level of production or sales volume over the short term.
Audio
Pronunciation
Definition
Meaning and Definition
A business expense that does not change with the level of production or sales volume over the short term.
In personal finance, any regular, predictable expense (e.g., rent, insurance premiums). Metaphorically, any obligatory or unchanging commitment of resources.
Dialectal Variation
British vs American Usage
Differences
No lexical difference. Spelling of related terms may differ (e.g., 'analyse costs' vs. 'analyze costs').
Connotations
Identical technical connotation in business contexts.
Frequency
Equally common and fundamental in both UK and US business/economics discourse.
Grammar
How to Use “fixed cost” in a Sentence
incur a fixed costcover the fixed costsfixed costs of + NOUN (e.g., production)fixed costs associated with + NOUNVocabulary
Collocations
Examples
Examples of “fixed cost” in a Sentence
verb
British English
- The lease fixes the cost for five years.
- We need to fix our costs to improve forecasting.
American English
- The contract fixed the cost for five years.
- We fixed our overhead costs last quarter.
adverb
British English
- The service is charged fixed-cost annually.
American English
- The service is billed fixed-cost each year.
adjective
British English
- It's a fixed-cost contract, which provides us certainty.
- The fixed-cost element is quite high.
American English
- It's a fixed-cost agreement, which gives us predictability.
- The fixed-cost component is substantial.
Usage
Meaning in Context
Business
Essential for budgeting, break-even analysis, and financial planning. 'The factory's high fixed costs make it vulnerable during downturns.'
Academic
Used in economics, management, and accounting literature to model firm behavior and cost structures.
Everyday
Rare in casual conversation. May be used metaphorically: 'My gym membership is a fixed cost I can't avoid.'
Technical
Precisely defined in accounting standards (e.g., IAS, GAAP) as costs that do not vary with output.
Vocabulary
Synonyms of “fixed cost”
Vocabulary
Antonyms of “fixed cost”
Watch out
Common Mistakes When Using “fixed cost”
- Using 'fixed price' interchangeably (a price is charged to a customer, a cost is incurred by the business).
- Confusing with 'sunk cost' (a past cost that cannot be recovered).
FAQ
Frequently Asked Questions
No. A fixed cost is an ongoing, unavoidable expense in the short term (e.g., rent). A sunk cost is a past expense that cannot be recovered and should not influence future decisions.
Yes, but not in direct response to production volume in the short run. Fixed costs can change over the long term (e.g., renegotiating a lease) or if a business makes a strategic decision (e.g., moving to a bigger factory).
Not always. Salaries of permanent staff are typically fixed costs. Wages for hourly workers or production staff that vary with output are variable costs.
It is crucial for calculating the break-even point, pricing products, budgeting, assessing financial risk, and making decisions about scaling operations.
A business expense that does not change with the level of production or sales volume over the short term.
Fixed cost is usually formal / technical (primarily business & economics) in register.
Fixed cost: in British English it is pronounced /ˌfɪkst ˈkɒst/, and in American English it is pronounced /ˌfɪkst ˈkɔːst/. Tap the audio buttons above to hear it.
Phrases
Idioms & Phrases
- “A millstone of fixed costs”
- “Stuck with fixed costs”
Learning
Memory Aids
Mnemonic
Think of a 'fixed' object that doesn't move. A 'fixed cost' is stuck in place, unmoved by how much you produce.
Conceptual Metaphor
COSTS ARE BURDENS / ANCHORS (a fixed cost is a heavy, unmovable anchor on a business).
Practice
Quiz
Which of the following is the BEST example of a fixed cost?