Question

Why are fixed costs also called capacity costs?

Answer 1

An expenditure or cost incurred by a company in order to expand its business operations. In other words, these are expenses incurred by an organization to increase its capacity to conduct business operations. Description: Capacity costs are fixed in nature.

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Answer 2

 Fixed costs are also called capacity costs as they are able to attain a pre-defined level of production or they extend an intended level of service, keeping the product or service attributes or key indicators intact such as quality, price etc.