What do yoy mean by capacity cost?

Capacity cost can be defined as the cost which is involved in expansion of the business. An expenditure or cost incurred by a company in order to expand its business operations. In other words, these are expenses incurred by an organization to increase its capacity to conduct business operations.Capacity costs are fixed in nature. They remain constant even when the level of output varies. This part of a company’s expenditure is intended to help expansion and increase activities, or for establishment of premises from where the business operations can be conducted. This expense remains fixed irrespective of the level of business activity.