Advertisement

Difference between fixed cost and variable cost

Visits

Difference between fixed cost and variable cost

Difference between fixed cost and variable cost:

Basis
Fixed cost
 Variable cost
Definition
The cost incurred by the fixed factors of production is called the fixed cost.
The cost incurred by the variable factor of production is called variable cost.
Output
It does not change with output.
It changes with output.
Relation
It is related to the fixed factor.
It is related to the variable factor.
Continuation
A firm can continue its production even if the fixed cost is not covered in the short run.
Production will be continued by a firm only if it’s variable cost is covered.
Examples
Rent, salaries of permanent staff, interest on capital, insurance cost, etc.
Cost of raw materials, wages of casual labor, expenses on petty overheads, etc.


Post a Comment

0 Comments