Fixed cost is the cost which accrue in relation to passage of time and which within certain output or turnover limit (relevant range), tend to be
unaffected by fluctuations in the level of activity, that is output or turnover.
The following are types of fixed cost:
- Committed costs: these costs are related to the provision of the capacity to do business. the amount of committed costs is fixed by decision which were made in the past and is not subject to management control in the present on the short run basis. since there is no relationship between committed cost and the actual utilization of existing facilities, the amount will remain constant over the whole range of operating activity.
- Programmed or managed costs: these costs are related to the utilization of capacity provided.