What is the difference between fixed and variable costs? Fixed costs do not change with the level of production or activity, while variable costs ...

The difference between fixed and variable costs is that fixed costs do not change with the level of production or activity, while variable costs do. Fixed costs are expenses that remain constant regardless of the volume of production or sales. Examples of fixed costs include rent, salaries of administration, and security. These costs are incurred regardless of whether the business is producing or selling anything. On the other hand, variable costs are directly related to the level of production or activity. They fluctuate as the volume of production or sales changes. Examples of variable costs include raw materials, sales commissions, and productive inputs. These costs increase or decrease in proportion to the level of production or sales. The classification of costs into fixed and variable is important for calculating the total cost and determining the break-even point of a business. By understanding the distinction between fixed and variable costs, companies can make informed decisions regarding pricing, production levels, and profitability.