Fixed and Variable Costs
Fixed costs are those, which are fixed in volume for a given output. Fixed cost does not vary with variation in the output between zero and any certain level of output. The costs that do not vary for a certain level of output are known as fixed cost. The fixed costs include cost of managerial and administrative staff, depreciation of machinery, building and other fixed assets and maintenance of land, etc.
Variable costs are those, which vary with the variation in the total output. They are a function of output. Variable costs include cost of raw materials, running cost on fixed capital, such as fuel, repairs, routine maintenance expenditure, direct labour charges associated with the level of output and the costs of all other inputs that vary with the output.
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