Fixed and Variable Costs

Fixed Costs are those costs that do not vary with the size of the output. Salaries of administrative staffs; Insurance premia; Property taxes; Depreciation of machinery, Permanent labor wage; Machine/tractor etc; The building or a rented building; Land or land rent; Fixed amounts: Like a fixed bill, principle installments bill, etc.

Variable Costs vary in a short period. The raw materials (short use expenses: seed, fertilizer, manure, pesticides, etc); Cost of direct labour; Running expenses of fixed capital (fuel, ordinary repairs, routine maintenance); Marketing expenses (packaging, labeling and wrapping, and selling, etc.