What are fixed and variable costs?

Can you explain what fixed and variable costs are?

Sure! Fixed costs remain constant regardless of production levels, like rent. Variable costs change with production, like materials.

Can you give me some examples of each?

Of course! Fixed costs include salaries and insurance, while variable costs include raw materials and shipping.

How do these costs affect pricing strategies?

They play a crucial role! Understanding these costs helps businesses set prices that cover expenses and ensure profitability.

What happens if fixed costs increase?

If fixed costs increase, businesses may need to raise prices or find ways to reduce variable costs to maintain profitability.