Let me explain better with a practical example

[suchona.kani.z]

When you run a business it is important to understand how profitable it is. To do this you need to know the value of the profit margin, how much you actually have left in your pocket net of the costs necessary for the activity.

To calculate the profit margin, therefore, it is necessary to know some other values ​​that are part of our business. Let's see them one at a time, starting with fixed costs and variable costs, which affect production and therefore revenue and your profit.

The definition of fixed costs (FC) is very simple: they are the expenses that the company must face practically always, regardless of the volume of goods produced .

Let's imagine that yours is a company that produces and retails korea email list personalized t-shirts . All the expenses you incur, beyond those related to production, are fixed costs.

So whether you produce 100 or 1000 t-shirts, it makes no difference, the fixed costs always remain the same.

Let's see what some example fixed costs are.

Property Rent. The monthly cost you incur for using the property where you produce your t-shirts and keep your office.

Depreciation. If the property where your company is located is not rented but you purchased it, this expense is a cost that must be depreciated. That is, the cost of the asset must be divided between the years of operation of the business.
So if the property cost you 100,000 Euros, this amount must be divided between the years in which your business presumably remains active.
This also applies to the machinery you purchased to produce your t-shirts and which depreciates over the years.
Let's say that the machine in your production plant cost you 10,000 Euros and that its estimated average life is 5 years. The expense you incurred must be divided into these 5 years, so the new machinery "will cost you" 2,000 Euros each year.