Fixed Costs in a Cost–Volume Context
CVP reports segment costs into variable and fixed expenses. Fixed costs do not change regardless of volume. For example, a company pays their monthly warehouse lease regardless of sales volume. Another example is advertising expenses, which do not vary directly with the volume of output. Fixed costs vary by industry; automakers and airlines typically have high fixed costs. CVP reports list fixed costs after the contribution margin.
This sample report classifies fixed expenses as manufacturing, selling, and administrative, which helps analyze the organization and identify fixed assets.
