Fixed Cost

Fixed Cost refers to costs that remain relatively stable within a certain period and business volume range, regardless of changes in production or sales volume, such as factory rent, equipment depreciation, management salaries, insurance premiums, etc. In foreign trade, fixed costs are commonly used in cost accounting, quotation decisions, and break-even analysis. Unlike Variable Cost, the total fixed cost remains unchanged, but the unit fixed cost decreases as business volume increases. Usage scenarios include: calculating the break-even price for exports, evaluating the impact of incremental orders on profit, choosing between in-house production or outsourcing, etc. Notes: Fixed costs are not permanently fixed; they may jump when business volume exceeds the relevant range (e.g., adding a new production line); distinguish fixed costs from sunk costs, which are costs that have already been incurred and cannot be recovered and should not affect future decisions; in the long run, all costs are variable. Difference from marginal cost: Marginal cost is the cost of producing one additional unit of output, which may include variable costs and part of fixed costs.