1.

Differentiate between fixed cost and variable cost.

Answer»

1. Fixed cost:- The expending to be incurred in case of production or no production, can be called as fixed cost.

2. Variable cost:- Variable cost is that expenditure which increase or decreases according to the production is known as variable cost.

S.No.Fixed CostVariable Cost
1.Expenses incurred an fixed sources of production are called fixed cost.Expenses incurred on variable sources of production are called variable cost.
2.It has no relation with volume of production.It varies according to changes in production. 
3.Fixed cost can not be zero even of the time of no production.It becomes zero after closing production.
4.A firm can continue production after bearing the loss of fixed cost
i. Rent of factory building.
ii. Salary of managers.		A firm continues its production till it receives revenue equal to variable cost.
Example of variable cost:-
i. Cost of raw material.
ii. Direct labour expenses.
 


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