Final answer:
The largest cost elements of building fixtures are usually related to overhead cost, which encompasses fixed costs like rent and equipment, which do not change with production levels. Labor, materials, and the cost of land also contribute significantly to overall fixture building costs.
Step-by-step explanation:
The largest cost elements of building fixtures are usually related to labor, material, equipment, or overhead cost. Among these, overhead cost, also known as fixed costs, is substantial since it does not vary with the level of production. Factors such as the cost of land, where cheaper land is available at the edges of cities, also impact the cost substantially. Additionally, the cost of machinery or equipment is significant, especially in industries requiring expensive manufacturing facilities, such as those producing computer chips. Furthermore, the cost of labor can be considerable, affecting the overall cost of building fixtures. Picking a profitable location, known as industrial site location analysis, is thus crucial for managing these costs efficiently.
An example of overhead cost is the rent on a factory or retail space, which remains constant regardless of the production volume. Dividing the fixed cost by the quantity of output results in the average fixed cost. If the fixed cost is $1,000, the average fixed cost curve would represent declining costs as output increases, illustrating the concept of "spreading the overhead."