Variable & Fixed Cost

By
Name .:- Arghyadip Karmakar
University Roll No.:-
University Reg. No.:-
Semester :- 3rd
Department:- Computer Science and Engineering
Continuous Assessment CA 1
Sub.:- Economics for Engineers[HS-MC 301]

MALLABHUM INSTITUTE OF TECHNOLOGY

ACADEMIC SESSION – 2022-23
 Table of Contents
1. Introduction.

2. Division of Cost & Graph.

3. Cost Classification for Predicting Cost

Behavior.
4. Difference between Fixed cost & Variable cost.

5. Example for Variable & Fixed Cost.

6. Conclusion.
7. References.
 INTRODUCTION
OF
Cost

 It is a value of money that has to be spent to produce, obtain or

purchase something.
 In Business, Cost is valuation of:
 Efforts
 Material
 Resources
 Times etc.
 Division of Cost by its Behavior
Cost of production has two behaviors.
 Fixed Cost.
 Variable Cost.
Fixed Cost
It is a cost which tends to be constant by increase or decrase in
the activity level.
For Example -
 Salary of the production manager.
 Insurance premium of factory work shop.

This graph shows that that cost remains fixed regardless of the volume of the output.
 Variable Cost
A variable cost is a cost which tends to very directly with the
change in the activity level.
For Example -
 Direct labor cost.
 Selling commision.

This graph shows a proportionate increase in the cost by the increase in the activity level
Cost Classification for Predicting Cost Behavior.
 Difference Between Fixed cost
and variable cost
Fixed Cost
 Fixed cost is the cost which does not
vary with the changes in the quantity of
production units.
 The Fixed cost is time-related, i.e. it
remains constant over a period.
 Fixed cost changes in per unit.
 Examples of fixed cost are : rent, tax,
salary, fees, insurance etc.
Variable Cost
 Variable cost is the cost
which varies with the changes
in the number of production
unit.
 Variable cost which is
volume related, i.e. it changes
with the change in volume.
 Variable cost remains
constant in per unit.
 Examples of variable cost
are : packing expenses, freight,
wages etc.
 Example of Fixed &
Variable Cost
Fixed Cost :
For example: XYZ Company pays monthly rent of $30000 for a
factory building. Reagrdless of how many units are produced, the
company paysa the same amount. If fix cost be computed, for the
fixed cost per unit at 1,000 units, it would be equal to 1,500 units,
fixed cost/unit would be $20($3000/&1,500 units)

Variable Cost :
For example: XYZ Company spends $2.50 materials cost for every
unit of product. If the company produces 1,000 units, it spends $2,500
($2.50 X 1,000). If it produces 2,000 units, then the company will spends
$5000 ($2.50 X 2000).
 CONCLUSION
This Short PPT describes about introduction of cost in Economic,
it’s types, and a short understanding of the important concept of
it based on a visual image & graphical representations and it also
describes its definition, types, difference, examples etc. This topic
will clear the basic concept of cost which is a small part of
Engineering Cost & Estimation unit of our Economics for Engineer
Paper.
 References
1. https://en.wikipedia.org/wiki/Fixed_cost#:~:text=In%20accounting%20and%20econ
omics%2C%20fixed,tend%20to%20be%20capital%20costs

2. https://www.slideshare.net/MuhammadAwais642/fixed-variable-cost