Fixed costs & Variable costs

Hi,
what is the difference between fixed and variable costs when we are doing cost center planning.
On what basis, we need to enter these costs?
Regards,
Krishna

Hi,
Fixed cost doesnt depend on quantity whereas Variable cost is directly proportional to quantity.
Total Cost= Fixed cost + Variable cost X Quantity
For eg. You produce pencils in a shop then rent of shop will be fixed cost and rate of labour per pencil will be variable cost. Irrespective of no of pencils produced you will have to pay fixed cost ie rent.
Hope this helps.
Regards

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