Question

Distinguish between Fixed cost and Variable cost.

Give one/two differences between Fixed Cost and Variable Cost.

Answer 1

	Basis of Distinction	Fixed Cost	Variable Cost
1.	Meaning	The costs which do not vary or which remain constant within a given period of time and range of activity inspite of fluctuations in output.	The costs which vary directly in proportion to changes in the volume of output.
2.	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.
3.	Basis	Fixed costs are time-based.	Variable costs are activity-based.
4.	Total and per unit cost	Fixed costs are fixed in total but vary per unit. These decrease with increase in the volume of output.	Variable costs are fixed per unit but vary in total. These increase with increase in the volume of output.
5.	Control	Fixed costs are not controllable in the short run.	Variable costs are controllable in the short run.
6.	Combination of	Fixed production Overhead, Fixed Administration Overhead and Fixed Selling and Distribution Overhead.	Direct Material, Direct Labour, Direct Expenses, Variable Production Overhead, Variable Selling and Distribution Overhead.
7.	Examples	Depreciation, Rent, Salary, Insurance, Tax etc.	Material Consumed, Wages, Commission on Sales, Packing Expenses, etc.