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Definition and Examples of

Fixed Cost

Explanation: Fixed costs are business expenses that remain constant regardless of the level of production or sales. They include expenses like rent, salaries, and insurance.

Example: The monthly rent for your small bakery shop is a fixed cost, as it remains the same irrespective of how many cakes you sell.

Potential Issues: Misjudging fixed costs can lead to budgeting errors and financial strain, particularly in businesses with fluctuating revenues.

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