Fixed cost is defined as the cost which is independent of maximum demand and units generated.
The fixed cost of electricity accounts for the annual cost of the central organization, interest on the capital cost of land, and salaries of officials.
It is worth noting that the annual expenditure on the central organization and salaries of officials is a fixed quantity since it has to be met irrespective of the fact that the plant has high or low maximum demand or it generates any number of units (less or more units).
Apart from the above, the capital investment on the land is fixed and hence the amount of interest is also fixed.
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