Fixed and Variable costs

Fixed costs are things such as the premesis hire or the amount you pay your staff. A business definition is the costs that you pay monthly, quarterly or yearly that do not change.

Variable costs are the costs that change with how many products you produce, the more you produce the more costs you have but the lower the cost per item there is.

For example if you sell 5 widgets with fixed costs of £2.00 and a total fixed cost of £1000 that means that it is 5*£2.00=£10.00
£1000/5=£200
£200+£2.00= £202.00 per item with a total cost of £1010 but if you make 10 items the total cost per item would be:

£10*£2.00=£20.00
£1000/10=£100
£100+£2.00=£102.00 per item with a total cost of £1020.00