What is a variable cost easy definition?
A variable cost is an expense that changes in proportion to production output or sales. When production or sales increase, variable costs increase; when production or sales decrease, variable costs decrease.
What is the difference between fixed and variable?
Fixed-rate financing means the interest rate on your loan does not change over the life of your loan. Variable-rate financing is where the interest rate on your loan can change, based on the prime rate or another rate called an “index.”
What is fixed cost with example?
Fixed costs are costs that are independent of volume. Fixed costs tend to be costs that are based on time rather than the quantity produced or sold by your business. Examples of fixed costs are rent and lease costs, salaries, utility bills, insurance, and loan repayments.
What is a variable cost example?
If a company bills out the time of its employees, and those employees are only paid if they work billable hours, then this is a variable cost. However, if they are paid salaries (where they are paid no matter how many hours they work), then this is a fixed cost.
What is total fixed cost?
Total fixed cost is the total amount of money a business must pay to keep their operations running regardless of how many products they make or sell. Total fixed cost does not change regardless of production or lack of production. Fixed costs are those that still exist even when production is at zero.
What is the difference between fixed cost and variable cost with example?
Key Takeaways Fixed costs remain the same throughout a specific period. Variable costs can increase or decrease based on the output of the business. Examples of fixed costs include rent, taxes, and insurance. Examples of variable costs include credit card fees, direct labor, and commission.
Which is a fixed cost?
Fixed costs are costs that do not change when sales or production volumes increase or decrease. This is because they are not directly associated with manufacturing a product or delivering a service. As a result, fixed costs are considered to be indirect costs.
What is variable cost formula?
Variable Cost Formula. To calculate variable costs, multiply what it costs to make one unit of your product by the total number of products you’ve created. This formula looks like this: Total Variable Costs = Cost Per Unit x Total Number of Units.
Which one is fixed cost?
Fixed costs include any number of expenses, including rental lease payments, salaries, insurance, property taxes, interest expenses, depreciation, and potentially some utilities. For instance, someone who starts a new business would likely begin with fixed costs for rent and management salaries.
What is a variable cost in business?
Variable costs are expenses that vary in proportion to the volume of goods or services that a business produces. In other words, they are costs that vary depending on the volume of activity. The costs increase as the volume of activities increases and decrease as the volume of activities decreases.
What is a total variable cost?
Your total variable cost is the sum of all variable costs associated with each individual product you’ve developed. Calculate total variable cost by multiplying the cost to make one unit of your product by the number of products you’ve developed.
What is variable cost Mcq?
Variable costs are the costs that change in total each time an additional unit is produced or sold. With a variable cost, the per unit cost stays the same, but the more units produced or sold, the higher the total cost.
What is the fixed cost formula?
Fixed costs = Total production costs — (Variable cost per unit * Number of units produced)
What is fixed cost Mcq?
Fixed cost is a cost which do not change in total during a given period despite changes in output. A fixed cost is a cost that does not change with an increase or decrease in the amount of goods or services produced or sold.
Is salary a variable cost?
Annual salaries are fixed costs but other types of compensation, such as commissions or overtime, are variable costs.