Fixed costs are expenses that remain the same overall regardless of how much activity is being performed.
Fixed costs are expenses that remain constant regardless of whether sales or production volumes rise or fall. This is so because they are not involved in the actual process of producing a good or providing a service. Fixed costs are therefore regarded as indirect costs.
Some examples of fixed costs include rent and leasing fees, salaries, energy bills, insurance, and loan repayments. Some taxes, like business licences, are also recurring expenses.
Variable costs, as opposed to fixed costs, are directly tied to the price of producing goods or services. While fixed costs are frequently excluded from COGS, variable costs are frequently referred to as the cost of goods sold (COGS).
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