How do fixed costs differ from variable costs?

Fixed costs and variable costs are two distinct types of expenses that businesses incur. Fixed costs remain constant regardless of the level of production or sales. Examples include rent, salaries, and insurance. On the other hand, variable costs fluctuate with the level of production or sales. Examples include raw materials, direct labor, and utilities. In summary, fixed costs are expenses that do not change with the level of output, while variable costs vary directly with production levels. Fixed costs, such as rent and salaries, remain constant, whereas variable costs, like raw materials and direct labor, adjust according to the business's activity. Understanding the difference between these two types of costs is crucial for effective financial planning and management.