Costs: Fixed Vs Variable: What are Fixed and Variable Costs?

Fixed costs and variable costs together make up a company's total cost. These are the two types of costs that companies have to bear when producing goods and services. A fixed cost does not change with the volume of goods or services a company produces. It always remains the same.
A variable cost, on the other hand, increases and decreases depending on the volume of goods and services produced. In other words, it varies with the amount produced.

Differences between Fixed and Variable Costs 

Let's take look at some of the main differences between fixed and variable costs:

Tips 
When trying to determine whether a cost is fixed or variable, simply ask the following question: Will the particular cost change if the company stopped it's production activities? If the answer is no, then it is a fixed cost. If the answer is yes, then it is probably a variable cost.