Fixed overhead represents expenses that a business incurs, which do not vary with changes in production activity. These costs are typically recurring and not directly tied to the production of goods or services. For example, rent for the office space, salaries of administrative staff, depreciation of equipment, and insurance payments are considered fixed overhead costs.

Companies monitor fixed overhead to understand their ongoing financial obligations and to better manage profitability, especially during periods of varied operational performance. For instance, an organization might analyze how the fixed overhead factors into their overall cost structure to assess budgeting strategies. A common expression of this analysis is calculating the fixed overhead per unit, especially in manufacturing environments, to help in determining product pricing and cost efficiency. Including fixed overhead in internal financial reports offers a clearer picture of the company's financial health.