Difference Between Fixed And Variable Cost
The main dissimilarities or difference between fixed costs and variable costs can be pointed out as follows:
1. Meaning
Fixed Cost: It is a constant cost associated with fixed factors of production.
Variable Cost: It is a cost associated with the variable factors of production.
2. Variations
Fixed Cost: Do not vary (increase or decrease) with change in the quantity of output.
Variable Cost: It varies or changes with the change in the volume of production or output.
3. Zero Situation
Fixed Cost: It never becomes zero
Variable Cost: It will be zero in case of no production.
4. Nature
Fixed Cost: It is related with time.
Variable Cost:It is related with the volume of output.
Also Read:
Also Read:
5. Factors
Fixed Cost: Related to fixed factors of production like rent and wages.
Variable Cost: Related to variable factors of production like raw materials and fuel charges.
6. Examples
Fixed Costs: Depreciation, wages, rent, insurance etc.
Variable Costs: Materials, electricity, commission etc.
Fixed Cost Vs Variable Cost (Comparison Chart)
I hope this post is helpful to understand the difference between fixed cost and variable cost and to make comparison between them.
Fixed Cost Vs Variable Cost (Comparison Chart)
Basis For Difference
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Fixed Cost
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Variable Cost
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Introduction
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Cost associated with fixed factors of productions and does not change with the change in production volume
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Cost related with variable factors of production and changes according to the change in the volume of production
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Variations
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No
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Yes
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Zero Situation
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Never
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May become zero in case of no production
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Nature
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Time related
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Volume related
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Factors
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Fixed factors such as rent, wages etc.
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Variable factors such as raw materials, fuel charge etc.
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Examples
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Wage, insurance, rent, depreciation etc.
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Materials, electricity charge, commission etc.
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I hope this post is helpful to understand the difference between fixed cost and variable cost and to make comparison between them.
