fixed costs vs variable costs

Fixed costs are expenses that do not change regardless of how much a business produces or sells. Examples include rent, salaries, and insurance. These costs remain constant over a specific period. Variable costs, on the other hand, fluctuate based on production levels. They include expenses like materials, labor, and utilities, which increase or decrease as more or fewer products are made. Understanding the difference helps businesses manage their budgets and pricing strategies effectively, ensuring they cover their fixed costs while optimizing variable costs for profitability.