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7. Cash flows from operations: What are variable costs and fixed costs? Variable costs are costs that vary directly with the
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7.

  • Variable costs vary directly with the number of units sold. Fixed costs do not vary with the number of units sold.
  • Lets take an example of a video game player.
  • In this example, Variable costs are those required for purchasing the components of the player, labor costs and sales and marketing expenses. These costs will vary according to the number of units produced.
  • Fixed costs are those associated with assembly space and administration expenses.

8. Fixed costs are operating expenses that do not vary with the number of units sold while variable costs directly vary with the number of units sold.

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