What's the difference between fixed and variable costs?


Fixed are costs that do not change with the level of output. For example, heating bills would be a fixed cost. Whether we make 100 computers or 300 computers, our fixed costs do not change. Variable costs are costs that do change with output, for example packaging. If we make 100 computers and our packaging costs are £5 per computer, the our packaging costs would be £500. This would then change if we were to make 300 computers as our cost is not £900.

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