Question

identify a fixed cost and variable cost and give specific examples.

Answer 1

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Answer

Fixed costs are the costs which remain same irrespective of the level of production . They remain the same even if the production is zero . They are time related . For example - Rent paid for a year, Leasing costs of a machinery etc.Even if the production is stopped the , rent has to be paid .

Variable costs are the costs which change with the change in the level of the output . Higher the level of output higher the costs and vice versa . They are usually Volume- related . For example Direct labour , Direct material etc . There will be cost of raw material only when the unit is produced . Labour will be paid only when the work is done .