How are fixed costs different from variable costs?
Responses
Fixed costs only exist in command economies; variable costs only exist in market economies.
Fixed costs only exist in command economies; variable costs only exist in market economies.
Fixed costs are costs associated with capital, such as machinery; variable costs are the cost of labor.
Fixed costs are costs associated with capital, such as machinery; variable costs are the cost of labor.
Fixed costs do not change no matter how much a business produces; variable costs do change.
Fixed costs do not change no matter how much a business produces; variable costs do change.
Fixed costs are the same for all businesses; variable costs apply to individual businesses alone.
Fixed costs are the same for all businesses; variable costs apply to individual businesses alone.
Fixed costs do not change no matter how much a business produces. They are the expenses that a business incurs regardless of its level of production or sales. Examples of fixed costs include rent, property taxes, insurance premiums, and salaries of permanent staff.
Variable costs, on the other hand, change with the level of production or sales. They are directly related to the volume of a business's output or sales. Examples of variable costs include the cost of raw materials, direct labor costs, and sales commissions.
In summary, fixed costs are constant and do not vary based on output or sales levels, while variable costs fluctuate based on the volume of production or sales.