![]() ![]() Depreciation: This is the loss of value of assets over time, and it is also a fixed cost as it does not change with the level of production.Insurance: The cost of insuring a business or its equipment remains the same, no matter how many units are produced.Salaries: Many staff salaries are fixed and do not change with the level of production.Rent: The cost of renting a space for business operations doesn’t change with the level of production.These costs are constant, regardless of how much a business produces or sells. ![]() Packaging and shipping costs: More units produced and sold mean more costs for packaging materials and delivery expenses.įixed costs are expenses that do not change with the level of output or production.Utilities: Higher levels of production often require more power, water, or gas, increasing utility costs.Direct labor costs: More labor hours are required when production levels increase.Cost of raw materials: The cost increases with increased production.As production increases, variable costs increase as production decreases, these costs decrease. Variable costs are business expenses that change in proportion to the level of output or production. Understanding the difference between variable costs, fixed costs, and marginal costs is essential for managing business expenses and making strategic decisions. What is the difference between fixed cost, variable cost, and marginal cost (with examples) Examples of variable costs include raw materials, direct labor costs, and utilities associated with the production process like electricity or water usage. In other words, when a company produces more goods or services, the variable cost increases when it produces less, the variable cost decreases. ![]() Variable cost refers to business expenses that vary directly with the level of output or production. ![]()
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