Final answer:
Committed fixed expenses are costs for multi-period service capacities paid for upfront or through periodic payments. These costs do not change with the level of production and can include rent, machinery, and development costs.
Step-by-step explanation:
When organizations acquire many multi-period service capacities either by paying cash upfront or by entering into contracts that require periodic cash payments, these are known as committed fixed expenses.
These are expenditures on long-term, fixed inputs and infrastructure such as capital that don't change in the short run, regardless of the level of production.
Rent on a factory or retail space, machinery and equipment costs, research and development, and branding expenses like advertising are all examples of fixed costs.
Certain businesses, particularly those in manufacturing such as computer chip production, may have high fixed costs, requiring expensive assets.
However, others, like local moving services, may have lower fixed costs if they rent their needed equipment on demand.
Cost patterns vary widely across industries. For instance, an online medical advice company might have high initial fixed costs for setting up the website and infrastructure but relatively low variable costs post-launch.
On the contrary, a seasonal business such as leaf-raking or snow-shoveling has low fixed costs, primarily requiring just basic tools and transportation.
Yet, some businesses with round-the-clock operations may experience sharp increases in marginal costs due to the continuous need for maintenance and repair of overused equipment.