Fixed cost in corporations
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Fixed cost in corporations
Fixed costs that include rent for the corporate facilities and general overhead and administration, also depend on whether a corporation is a state corporation, which is less efficient and on the quality of the corporation. Fixed costs are higher in state corporations and are independent of the production and hiring levels.
The fixed cost of a state corporation is very high, specially if the corporation is producing at a very high quality. If the corporation becomes a private or public corporation, fixed cost will immediately fall sharply.
Fixed cost, like maintenance cost, does not depend on the production level in the corporation. It is the same amount independent of the income of the corporation. This is why the fixed cost is relatively higher if the corporation is producing at a low level. Corporations that are producing a low level become much less profitable because several cost items become relatively high.
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