Chapter 13.5, Problem 13.10LR

Summary Introduction

To differentiate: The variable cost and fixed cost.

Introduction:

Costs of production and sales do not vary in the particular period of time. For example, rent, salary, interest should be paid on monthly basis whether the company produces products or not and this cost is known as the fixed cost.

Cost differs directly on the basis of the level of production. For example, material cost, electricity cost, wages paid only if they can be used; otherwise, company need not spend amount for these expenses and this cost is known as the variable cost.