What is the difference between Fixed and Variable Costs?
Fixed costs remain constant in total regardless of changes in volume of production and sales, upto a certain level of output.There is an inverse relationship between volume and fixed costs per unit. If volume of production increases, the fixed costs per unit decrease.Thus, total fixed costs do not change with a change in volume but vary per unit of volume inversely. Variable costs vary in total in direct proportion to changes in volume. Image Source : longtermcarenow.com ADVERTISEMENTS: An increase in the volume means a proportionate increase in the total variable costs and a decrease in volume results in a proportionate decline in the total variable costs. There is a linear relationship between volume and variable costs. They are constant per unit.Many costs fall between these two extremes. They are…