Difference between fixed cost and variable cost - Economics

Difference between fixed cost and variable cost - Class 12 Economics

Cost means the amount of money spent by a company on the manufacture or manufacturing of goods or services.

Fixed Costs

1. Meaning of Fixed Costs- Costs that remain constant for some time, regardless of the level of outputs.
2. Dependence of Fixed Costs- Dependent on fixed factors.
3. Cost at Output = 0 -- FC = n, ‘n’ is the fixed amount that stays constant.
4. Longevity of Fixed Costs - Found only in the long run.
5. Other names of Fixed Costs- Overhead costs, Supplementary costs or Period costs.
6. Examples of Fixed Costs - Rent, loan payments, property taxes, depreciation.

Variable Costs

1. Meaning of Variable Costs- Costs that vary in direct proportion to the changes in business activities.
2. Dependence Variable Costs- Dependent on variable factors.
3. Cost at Output = 0 -- VC = 0
4. Longevity Variable Costs - Found in the long and short run.
5. Other names Variable Costs- Direct costs, Prime costs.
6. Examples Variable Costs - Costs of goods sold, wages, commissions.

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