Question

I wanna know what is different between fixed cost and variable cost what it change and what it cannot be change between them ?

Answer 1

Fixed costs includes fixed production costs such as machine depreciation. factory rent, Fixed utility charges, manager's salary, etc and Fixed selling and administrative costs includes administrative salaries, advertising expenses etc.

Variable costs are costs which are directly related to volume of production and sales revenue. Variable production cost includes direct material, Direct labor, Variable overheads etc while variable selling and administrative expenses include sales commission of sales personnel, Variable carriage outward cost etc.

Differnciation

Variable cost are costs that are directly Fixed cost are costs that do not change with the change in the volume of production while on the other hand Variable cost increase when production increase and it decrease when production decreases.

When production increases the variable cost per unit remain the same but fixed cost per unit decreases since the numerator (which is fixed cost) remains fixed.

Variable cost in totality increases with increase in production and decreases with decrease in production. Fixed cost do not change whatever the level of production is.

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Lastly

Fixed cost do not change in totality, Variable cost change in totality,

Fixed cost change in per unit level, variable cost do not change on per unit level.