Glossarytaught in M4.02
Fixed costs
Also called fixed cost base, overheads.
Costs that do not vary with output over the relevant range: rent, salaries of permanent staff, depreciation, insurance.
They are the source of operating leverage, and the reason two companies with the same revenue and the same gross margin can have completely different earnings volatility.
Whether a cost is fixed depends on the time horizon. Almost every cost is variable over five years, and almost none is variable over one month. So the useful question is what can be changed within the period being modelled.
Fixed in the short run, negotiable in the long one.