The fixed expenses formula assists in estimating the total fixed cost of a business. It can be represented as:
Total Fixed Cost =Total Cost-(Variable Cost per Unit(quantity produced)) Number of Units Produced.
This formula compartmentalizes costs which do not change with the level of production. As an illustration, assuming that the total cost incurred by a firm is 10,000, variable cost/unit is 5 and 1,000 units are produced the fixed cost = 10,000- (5 x 1,000) = 5,000. By knowing this equation, businesses can know break-even points and make superior financial planning choices depending on their cost structure.
