Variable Costs

Variable costs are expenses that change in proportion to the activity of a business. In other words, variable cost is the sum of marginal costs. It can also be considered normal costs. Along with fixed costs, variable costs make up the two components of total cost. Direct Costs, however, are costs that can be associated with a particular cost objects. Not all variable costs are direct costs, however; for example, variable manufacturing overheadcosts are variable costs that are not a direct costs, but indirect costs.Variable costs are sometimes called unit-level costs as they vary with the number of units produced.

The Knowledge Worker - Fixed Costs

Fixed costs are costs that don't change depending on production or sales levels, such as rent, property tax, insurance, or interest expense. In simple terms, fixed costs are costs that will not change depending on factors affecting them. It is a cost that is agreed before hand and is kept the same.