![]() ![]() ![]() The more goods or services the sales staff sell, the more commission they earn. Sales commission: Sales commission refers to the cost a business pays an employee for making a sale. Packaging costs: These costs include the price of raw materials the business uses to create a product or service, also known as 'Cost of Goods Sold' (COGS).Ĭosts of direct labour: These costs refer to the cost of labour a business requires during the production of a single unit. Some common examples of variable costs include: Here is a list of some of the variable costs a company may face: Examples of variable costs A variable cost is a specific cost for each item that a company creates, which then increases or decreases according to the production numbers. They may also decrease when the volume of production decreases. These variable costs may increase when the volume of production increases. Variable costs are the expenses a business faces determined by output, or by the number of goods or services a company produces in a certain time period. Related: How to calculate fixed cost quickly and conveniently What are variable costs? Utility bills: These costs include the cost of Internet, electricity, telephone bills or gas the business uses to produce goods or services.ĭepreciation costs: These expenses refer to the cost of replacing assets or materials from wear and tear. Interest rates and loan repayments: These costs refer to the interest rates a company pays for lending or borrowing funds. Insurance premiums: The costs the business pays for insurance on property, equipment and more.īusiness property taxes: This cost is the tax that a business pays on the assessed value of the property the business owns. Rental or mortgage costs: These include the cost of the property unit the business operates in, such as monthly rental or mortgage payments.Įmployee salaries: These costs include employee salaries or billable wages. Some common examples of fixed costs include: Here is a list of the most common fixed costs you may see during the accounting: Examples of fixed costs The more fixed costs the business has to pay, the more money it may require to make to achieve a profit, or to break even. They're one of the easiest costs to allow for in a company's budget, but they're also less manageable because they don't decrease even if the company doesn't make any money. They're not determined by the number of products or services the business creates. What are fixed costs?įixed costs are expenses the company always pays for, whether it's monthly or annually. Variable costs fluctuate according to the volume that's produced. Fixed costs stay the same no matter how many products the company produces. In business, fixed vs variable costs are the two main types of costs that a company faces when they're offering goods or services. In this article, we explain what fixed costs are, what variable costs are and what the differences between them are, with examples of both. It's important to know which costs you have flexibility over and which the business relies on to make a profit. If you know where and what your team is spending on, you can see where you can cut down on costs. ![]() Managing your budget is one of the most important skills for the finance department. ![]()
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