Distinguish between fixed and variable costs. Give one example of each.
|Basis||Fixed Costs||Variable Costs|
|Definition||Total of expenditure
incurred by the producer on
the purchase or hiring of fixed factors of production.
|Expenditure incurred by the producer on the use of variable factors of production.|
|Variability||Does not change with
change in quantity of output. Remains the same whether the output is zero or
|Changes with change in quantity of output.
Cost is zero when the output is zero.
|Examples||Cost of plant and machinery, Wages of permanent staff||Cost of raw materials,
Wages of casual labours
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- Basic Concepts of Cost
Solution Distinguish Between Fixed and Variable Costs. Give One Example of Each. Concept: Basic Concepts of Cost.