A fixed cost is an expense that does not change regardless of the level of production or sales. This means that whether a business produces a lot or a little, these costs remain constant over a specific period. Common examples of fixed costs include rent, salaries, and insurance premiums. Businesses must account for fixed costs when planning their budgets, as they can significantly impact profitability. Understanding fixed costs helps companies set pricing strategies and make informed decisions about scaling operations. Unlike variable costs, which fluctuate with production levels, fixed costs provide a stable baseline for financial planning.