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This question is about employer.
Fixed cost vs. variable cost
The difference between fixed cost and variable cost is that fixed cost refers to a company expense that remains the same no matter the level of production or sales, while variable cost refers to a company expense that can change depending on the level of production or sales.
Fixed costs represent expenses that must be paid regardless of the varying degrees of production activity or the number of product or service units a company sells. Some examples of fixed costs for businesses include employee salaries, rent, business insurance and other insurance plans, and taxes. Fixed costs can also be referred to as business overhead.
Variable costs, on the other hand, are costs that can fluctuate depending on the degree of production activity or sales volume. These expenses are directly linked to the number of product or service units sold by a company. Some examples of variable costs include raw materials for manufacturing, packaging, and volume of needed labor.
Key Takeaways:
| Fixed cost | Variable cost |
|---|---|
| Fixed cost refers to a company expense that remains the same no matter the level of production or sales. | Variable cost refers to a company expense that can change depending on the level of production or sales. |
| Some examples of fixed costs for businesses include employee salaries, rent, business insurance and other insurance plans, and taxes. | Some examples of variable costs include raw materials for manufacturing, packaging, and volume of needed labor. |
| Fixed costs can also be referred to as business overhead. | Variable costs can sometimes be referred to as marginal costs when they represent the specific cost of producing an additional unit. |
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