What it means in practice
Rent may remain the same whether a business sells one more item or not. That does not make it permanently unchangeable. Moving premises or increasing capacity can create a new cost level. Define the period and relevant range before modelling. A cost can also contain fixed and variable parts. Separating those parts helps explain what changes with an additional sale and what the business must cover regardless. Fixed describes behaviour within a defined range and period, rather than a cost that can never change. A larger operation may require another premises or supervisor, creating a step in the cost base. Review whether the proposed activity stays within the existing capacity. A break even calculation using current fixed cost can become misleading if growth triggers an additional commitment.
A fictional worked example
A fictional workshop pays ₦300,000 monthly rent within its current capacity, whether it completes 80 jobs or 90.
A useful question
Which cost stays the same for one more order but changes at a larger scale?
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