Fixed Costs Are Sunk Costs

Total fixed costs are those costs that do not change when you produce goods and services. They include land, buildings, and equipment, such as computers.

If you were to build a manufacturing plant that had the capacity to produce a hundred widgets over the life of the plant, the cost of that plant would be the same whether you produce nothing, fifty widgets, or one hundred widgets. Hence the expression "fixed costs." Businesspeople often refer to fixed costs as sunk costs because, once the plant is built, your money is sunk into the plant.