Commercial Applications
Give one/two differences between Fixed Cost and Variable Cost.
OR
Distinguish between fixed cost and variable cost. (any one point)
Cost
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Answer
| S.No. | Basis of Distinction | Fixed Cost | Variable Cost |
|---|---|---|---|
| 1. | Behaviour | Fixed costs remain constant within a given range of activity and a given time period. | Variable costs vary in proportion to changes in the volume of output. |
| 2. | Basis | Fixed costs are time-based. | Variable costs are activity-based. |
| 3. | Total and per unit cost | Fixed in total but vary per unit. They decrease per unit with increase in the volume of output. | Fixed per unit but vary in total. They increase in total with increase in the volume of output. |
| 4. | Control | Fixed costs are not controllable in the short run. | Variable costs are controllable in the short run. |
| 5. | Examples | Rent, insurance, depreciation of plant. | Cost of raw material, power, fuel. |
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