The following are some examples of expenses that are likely to be fixed within a reasonable range of sales:
- the compensation of the store manager who receives the same salary and fringe benefits every month
- the depreciation expense for a store's buildings, fixtures, and equipment
- the constant monthly amounts for security, maintenance fees, phones, internet service, insurance, lighting, advertising, etc.
Knowing the amount of a company's fixed expenses assists in understanding how its net income will change as volume changes. The total amount of fixed expenses can also be used to quickly estimate a company's break-even point.
View Our Course Outline