Fixed cost

The fixed costs (in short: fixed costs, including readiness costs, time-dependent costs or employment- independent costs) are a part of the total costs, which remain in the change of an observed datum (usually employment) in a given time constant. It is, for example, time depreciation of fixed assets or lease or interest expense. Since fixed costs are incurred regardless of the application rate ( short-term), they can not be causation allocated to the unit cost. The opposite of the fixed costs are the variable costs. The proportion of variable and fixed costs is calculated by cost resolution.

With a sufficiently long-term observation period, there are no fixed costs. Therefore, it is in fixed costs by a non-unique (in terms of the production / time function ) auxiliary structure to the unknown in advance actually caused by a production cost in advance, or during production, to estimate.

Demarcation of fixed costs

• Product Fixed costs are costs that are incurred for a particular product, and who are independent of the output quantity. This can be, for example cost of a special tool which is only used to produce a particular product.

• Product Group Fixed costs are costs that are incurred only for products of a specific group of products, and who are independent of the output quantity. This can be, for example costs for machines that are used only in the manufacture of this product group.

• Cost centers Fixed costs are costs that are incurred within a cost center for several product groups, and who are independent of the output quantity. This can be costs for the premises, for example.

• Range Fixed / recessed fixed costs are costs that are incurred only for product groups, which are summarized within an area or division. This can be, for example administrative costs.

• Corporate Fixed costs are costs that can be assigned to either a product, a group of a cost center or an area or a division. This can be, for example, contributions or general costs of management.

• Mixed costs are costs that can be described neither as purely fixed nor as pure variable. Simplicity, however, they are partially treated as fixed costs.

Fixed costs and unit costs

Ways (see also the average cost) of a unit of product include the fixed costs in its unit cost,

• Dividing the fixed costs by the output quantity ( Fixkostenproportionalisierung )
• Distribution according to the principle of averages
• Division into useful and idle capacity costs after the stress principle

Distributed fixed costs on the output quantity and calculated by summing the variable costs full cost, then it must be noted that the full costs are often not relevant for the decision in the short term. With a reduction of applications account for about only variable costs, fixed costs, however, remain unchanged. Therefore, a distribution of fixed costs on the output quantity entails the risk of wrong decisions in company: A company that decides on an additional order, this should accept even if the full costs are not covered, you but on the variable costs beyond a contribution margin to cover part the fixed costs can redeem.

Fixed costs and overheads

Fixed costs are often equated with overheads, which is not always correct, but because of the different viewing directions of the terms. Overhead costs are costs that can not be directly assigned to a cost object. The salary for example, a firm operating only for a particular cost unit employee, for example, as a development engineer for a special product that is ( fix = ) from the output quantity independently, at the same time but only from this one cost object causes ( = costs).

Fixed costs jump

Jump Fixed costs (also interval fixed costs ) are costs that are within certain intervals constant but rise to another level between these intervals or fall ( "jump" ). The cost function in this case takes on a stair-like curve. This happens for example when starting from a certain number of pieces to be produced, the production capacity is no longer sufficient, and it comes to new investments (eg new equipment ) or other extensions.

Example: A machine caused fixed costs (such as depreciation and the like) in the amount of 500 euros. On it can within 24 hours max. 30 parts are made. If the production volume will be increased to 31 parts, another machine is required. The fixed costs skyrocket from 500 to 1000 euros. As long as the production volume now remains below 60 parts, no other machines need to be purchased.

The adjustment of capacities at higher workloads and thus causing additional fixed costs, as described in the above example, can lead to the so-called fixed costs case: If additional fixed costs caused by expansion investments, but these are not covered contrary to expectations through additional sales, thus leading the additional fixed costs to a deterioration of the result, perhaps even to a loss situation.

• Cost accounting