Fixed and variable costs are two of the most important components of a business. They refer to the money spent on different aspects of running the company or producing goods and services. This article will discuss the differences between fixed and variable costs, their impact on businesses, and how they work together.
About Difference Between Fixed Cost And Variable Cost
| Fixed Cost | Variable Cost |
|---|---|
| Costs that remain constant regardless of production or sales volume. | Expenses that vary with the level of production or sales. |
| Unaffected by changes in activity. | Directly proportional to business activities. |
| Examples include rent, insurance and salaries. | Examples include materials, commissions and shipping. |
| Cannot be reduced easily. | Can be reduced quickly. |
| Often referred to as overhead expenses. | Often referred to as operating expenses. |
| Included in cost of goods sold (COGS). | Not included in COGS. |
| Includes depreciation. | Does not include depreciation. |
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