Fixed
Variable
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examples of fixed cost factory are salary, rent, electricity bills while variable cost are purchase of raw materials,
Purchasing of motor vehicle is example of fixed cost while using fuel for running those motor vehicles is a variable cost.
Direct labor and direct material is example of variable cost which increase with each increase of unit. Factory rent is example of fixed cost which remains fixed even in change in number of units produced.
The relataionship of cost between the level of production is determine the fixed or variable cost if cost change with production level then it is variable cost otherwise fixed cost.
Variable cost = Total Cost/ fixed cost