What Is The Difference Between Fixed Cost And Variable Cost

Variable costs may include labor commissions and raw materials.

Variable cost is the cost which varies with the changes in the quantity of production units. Variable cost remains the same per unit. Fixed cost that refers to the cost that has to be payable no matter there is any production or sale activity in the business or not like rent payable salaries payable and other utilities payable whereas variable cost refers to the cost that varies with the production of goods services that increase with the increase in production and vice versa like direct material direct labor etc. Variable costs are indefinite.

Variable cost is zero when there is no production. Fixed costs remain the same regardless of production output. Fixed cost includes expenses that remain constant for a period of time irrespective of the level of outputs like rent salaries and loan payments while variable costs are expenses that change directly and proportionally to the changes in business activity level or volume like direct labor taxes and operational expenses. Variable cost is comprised while evaluating inventory.

There are many differences between the fixed cost and variable cos which are explained here in tabular form fixed cost is the cost which does not vary with the changes in the quantity of production units. Fixed cost change per unit. Fixed cost is definite.