Distinguish, differentiate, compare and explain what is the Difference between Fixed costs and Variable costs. Comparison and Differences.

Difference between Fixed costs and Variable costs

1. Fixed costs refer to the cost that a firm incurs to employ fixed inputs or factors of production. Variable costs refer to the expenditure incurred by the producer on the use of variable factors of production.

2. Fixed costs are fixed and do not change with change in output. Variable costs change directly with change in the level of output.

3. Examples of Fixed costs are: Rent of a building, interest on capital invested, salary of permanent staff etc. Examples of Variable costs are: Expenditure on raw material, wages paid to casual labour etc.

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