fixed cost
Also called: fixed costs
A cost that doesn't change with volume within a period and a range of activity, such as salaries of the in-house team or office rent. Fixed doesn't mean unavoidable: many fixed costs are chosen.
Fixed costs don't change when volume changes within a period: one more lesson, order or customer this month leaves them where they are. Typical examples are in-house salaries, rent, software subscriptions and a monthly marketing budget. Variable costs, by contrast, grow with each unit.
"Fixed" describes how a cost reacts to volume, not whether it can be changed. A marketing budget is fixed within the month and still a decision for next month; salaries change through hiring and raises. And costs are fixed only within a range: double the customers and you need more people, a bigger plan or a bigger office. Costs that stay flat and then jump at a threshold are called step costs.
Fixed costs matter twice in product finance. They are what contribution margin has to cover, so they set the break-even point: total fixed costs ÷ contribution per unit. And they make per-unit cost misleading: spread over a busy month they look small, over a quiet month large, while the total doesn't move at all.
Example
Klasna's in-house team costs 540,000 UAH and office and tools 84,000 every month, from the September restart to the July lull. Per lesson, the salaries alone are 540,000 ÷ 9,620 ≈ 56 UAH in May but 540,000 ÷ 2,600 ≈ 208 UAH in July. Same people, same total; only the divisor changed.
Marketing is set month by month: 320,000 UAH in April and May for exam season, 150,000 in July. It doesn't grow with each lesson, so it counts as a fixed cost of its month, yet it was cut by a decision.
Common mistakes
- Treating fixed as untouchable. Fixed is about volume, not about whether a cost can be cut.
- Spreading fixed costs per unit for decisions. A "full cost per unit" swings with volume and hides what one more unit really adds.
- Assuming fixed forever. Beyond a range, fixed costs step up; check the range before planning growth.
- Calling seasonal spend variable. A budget that is higher in peak months because someone chose it is still fixed within each month.
Learn it in the course
- Break-even point in units and margin of safety · Break-even point in units: how many lessons a month cover the fixed costs, and how far sales can fall before a loss.
- Cost behavior: fixed, variable and step costs · Cost behavior on a real year of costs: which costs move with lessons, which don't, and which jump at a threshold.
- Driver-based forecasting · Driver-based forecasting: revenue and profit from learners, lessons, price and payout instead of last year plus ten percent.
- Contribution margin per unit: what one lesson leaves · Contribution margin per unit, step by step: price minus tutor payout, fees and video minutes, and what a lesson and a package really earn.
- Overtrading: why fast growth eats cash · Overtrading in numbers: acquisition is paid today and earned back over months, so a fast growth plan digs a cash hole first.