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Difference between fixed cost and variable cost

This page fixed cost vs variable cost describes difference between fixed cost and variable cost. As we know cost is money spent, a sacrifice or a value foregone to achieve an economical benefit. There are various types of costs based on their applications and functions.

Fixed Cost

Fixed costs are those that do not vary with changes in volume. On a per unit basis, fixed costs change inversely with changes in volume.

For example, rent charge of the infrastructures, interest on capital invested in machinery, salaries of the permanent employed staff etc.

Variable Cost

Variable costs are those that vary in total in direct proportion to volume. The variable cost per unit , however remains constant.

For example, fuel consumption per km, costs of raw materials used in producing the product, costs of daily labor employed.

Mixed costs are those that has both fixed cost and variable cost attributes.

Fixed Cost = (Sale Price - Variable Costs) X Sale Volume

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