Fixed Cost Calculator

What Counts as a Fixed Cost

A fixed cost is an expense that holds its amount for the period no matter how many units the business produces or sells. The Small Business Administration describes fixed costs as costs that do not change with sales or volume because they are based on time, and its worksheets put everything on a monthly basis (SBA, Break-even point, business guide). Rent does not care whether you shipped 300 units or 3,000. Salaried payroll, insurance premiums, depreciation on equipment you already own and the base portion of utilities all behave the same way.

The test is not whether the number ever moves. Rent resets at lease renewal and insurance reprices annually. The test is what the cost responds to: fixed costs respond to time and contracts, while variable costs respond to units. Materials, shipping, transaction fees and hourly production labor are variable; when volume goes to zero they go to zero with it, and a fixed cost line keeps billing.

Some lines split. Utilities carry a base charge that is fixed plus a usage charge that is variable, so most analyses put only the base here and let the usage ride with variable cost. Sorting the ledger this way is the whole job: once every line is labeled, the total is addition.

Total Fixed Cost: Adding the Lines

Total fixed cost = rent + insurance + depreciation + salaried payroll + base utilities + other fixed lines, all for the same period. The calculator above has a box for each of those lines and adds them live as you type.

Periods must match. An annual insurance premium of $5,400 is not a $5,400 fixed cost this month; the SBA guidance is direct about the conversion: divide annual amounts by 12, and quarterly amounts by 4, before adding them to the monthly total. A quarterly $1,200 payment therefore contributes $100 per month. Mixing periods is the most common error in small business cost sheets, and it silently inflates every number built on top.

Depreciation deserves a note even though it is a non cash line. You do not write a check for it, but the equipment wears out on a schedule, and accountants charge that schedule against each period as a fixed cost. The next section covers how the IRS lets you accelerate or elect out of that schedule.

Fixed Cost Per Unit and the Volume Effect

Fixed cost per unit = total fixed cost / units produced in the period. This is the number that makes fixed costs interesting, because the denominator moves while the numerator holds still. Example A on this page carries $10,200 of monthly fixed cost. At 850 units the load is 10,200 / 850 = $12.00 per unit. Produce 2,040 units in the same month and it falls to 10,200 / 2,040 = $5.00 per unit. Nothing about the business got cheaper; the same bill spread over more units.

The dilution is steep at low volume and flattens out: moving from 680 to 850 units saves $3.00 per unit, while the same 170 unit step from 1,200 to 1,370 units saves about $1.05. That shape is the fixed cost argument for volume, and it cuts both ways, because the same math punishes a shortfall. Missing a sales plan does not shrink the $10,200; it raises what each unit that did sell must carry.

Contribution Margin and Where Break-Even Fits

Fixed cost per unit answers one question: what must each unit carry. Contribution margin answers the paired question: what does each unit contribute. Contribution margin per unit = price - variable cost per unit. In Example A a $25 price against $10 of variable cost leaves 25 - 10 = $15 per unit toward fixed cost and then profit.

Put the two together and you get the break-even context. The SBA states the formula as fixed costs divided by the difference between price and variable cost, giving break-even units: 10,200 / 15 = 680 units for Example A (SBA, Break-even point). The calculator above shows that figure as context. This page stays focused on the cost side: how the lines add up and how they spread over volume. For full break-even analysis, sensitivity to price changes and margin of safety, use a dedicated break-even tool; the two pages share a formula but ask different questions.

A useful cross check ties the three numbers together: at any volume, profit = units x contribution margin per unit - total fixed cost. At 850 units that is 850 x 15 - 10,200 = 12,750 - 10,200 = $2,550 per month.

Depreciation and the Tax Rules Around It

Depreciation is the fixed cost line businesses most often enter wrong, because tax elections can replace the straight line schedule. Under IRS Publication 946, How To Depreciate Property (IRS, 2025 revision covering tax years beginning in 2026), the Section 179 election lets a business expense qualifying property immediately instead of depreciating it, up to a ceiling of $2,560,000 for tax years beginning in 2026, reduced dollar for dollar once Section 179 placements pass $4,090,000. Separately, the special depreciation allowance is 100 percent for qualified property acquired after January 19, 2025.

The accounting choice changes timing, not total cost. Electing Section 179 moves the entire expense into year one and the fixed cost line drops to nothing in later years; straight line depreciation spreads the same cost as a steady fixed charge. For pricing and break-even work, what matters is the schedule your management accounts use, so enter that figure in the calculator, and keep the tax treatment separate.

Whichever treatment you use, label the line and stay consistent. A cost sheet that mixes the tax view in one column and the book view in another will disagree with itself by exactly the depreciation figure every month.

Two Worked Examples

Example A is a small workshop. Rent $2,000, insurance $450, depreciation $600, salaried payroll $6,500, base utilities $350 and other fixed lines $300. The sum is 2,000 + 450 + 600 + 6,500 + 350 + 300 = $10,200 per month. At 850 units the fixed cost per unit is 10,200 / 850 = $12.00. With a $25 price and $10 variable cost, contribution margin is $15 and break-even is 10,200 / 15 = 680 units, so at 850 units the shop runs 170 units past break-even and earns 850 x 15 - 10,200 = $2,550 for the month.

Example B is a bakery with leaner lines: rent $1,800, insurance $250, depreciation $400, salaried payroll $4,600, base utilities $280 and other $220, summing to 1,800 + 250 + 400 + 4,600 + 280 + 220 = $7,550 per month. At 1,510 units the load is 7,550 / 1,510 = $5.00 per unit. Its price is $9 against $4 of variable cost, so contribution margin is 9 - 4 = $5 and break-even is 7,550 / 5 = 1,510 units. At exactly 1,510 units the fixed cost per unit equals the margin per unit: every dollar each unit contributes is consumed by fixed cost, profit is zero, and doubling output to 3,020 units drops the load to 7,550 / 3,020 = $2.50 per unit.

The contrast is the lesson: Example A sits 25 percent above break-even, while Example B sits exactly on it. Same method, different months.

Using Fixed Cost Numbers in Decisions

A total fixed cost figure earns its keep in three decisions. First, pricing floors: below break-even volume, price must at least cover variable cost, but over a planning year each unit should also carry its share of fixed cost, which is why the per unit figure belongs next to the price list. Second, commitments: leases and salaries are fixed cost decisions made years in advance, so model the new total before signing. Adding $1,500 of monthly rent to Example A lifts the total to $11,700, pushes break-even from 680 to 11,700 / 15 = 780 units and raises the per unit load at 850 units to 11,700 / 850 = $13.76.

Third, downturn planning: fixed cost is what keeps burning at zero sales, so it doubles as your worst case monthly cash need before variable costs. That is why lenders and the SBA both start cost analyses with the fixed lines.

Rebuild the sheet once a quarter. Contracts renew, insurance reprices, depreciation schedules end, and a per unit figure computed on last year's lines will mislead every decision it touches. The addition is trivial; the discipline of keeping the labels and periods right is the actual work, and it is what makes the per unit number worth quoting in a pricing meeting.