5.2 Fixed and Variable Costs

Fixed Costs

Fixed costs remain in TOTAL but change per unit based on the actual amount of production.  Here is a video to discuss these concepts.

Examples of fixed costs include monthly rent, mortgage or car payments, employee salary, depreciation calculated under straight-line method, and insurance.

Variable Costs

Variable Costs remain the same PER UNIT but CHANGE in total.  Watch this video for another explanation:

Variable costs for a manufacturer would include things like direct labor of hourly workers, other wage employees, direct materials, applied overhead,  sales commissions, and depreciation under units of production method.

Licenses and Attributions

More Study Resources for You

Show More