What is the difference between fixed cost and variable cost?

Question

Accepted Answer

Fixed cost remains constant regardless of production while variable cost changes with production.

Fixed cost is a cost that remains constant regardless of the level of production or sales. Examples include rent, salaries, insurance, and property taxes.
Variable cost is a cost that changes with the level of production or sales. Examples include raw materials, labor, and utilities.
Total cost is the sum of fixed and variable costs.
Understanding the difference between fixed and variable costs is important for businesses to determine their break-even point and make informed decisions about pricing and production levels.

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