In many situations, it is not unusual for a particular activity to incur a fixed cost. Examples where one might incur a fixed cost include opening a plant, producing a product, paying a commission on an order to buy stock, or retooling an assembly line.

In this next example, we will put together a product mix model much like the CompuQuick example. In this case, however, there is a fixed setup charge associated with the production of an item. In other words, whenever we produce any amount of a product, we incur a fixed charge independent of the output level of the product.