What is a Fixed Cost?

A fixed cost is a cost that does not change with the amount of goods or services produced or sold. Fixed costs are typically associated with running a business, such as rent, insurance, and salaries.

Is Labor a Fixed Cost?

Labor can be a fixed cost depending on the type of labor and the agreement between the employer and employee.

• Salaried Employees: Salaried employees are typically considered a fixed cost because the employer pays the same amount regardless of the amount of work completed.
• Hourly Employees: Hourly employees are typically considered a variable cost because the employer pays the employee based on the amount of work completed.

In conclusion, labor can be a fixed cost depending on the type of labor and the agreement between the employer and employee. It is important to understand the type of labor and the agreement in order to accurately calculate the cost of labor.