The of any firm are made up of their fixed costs and variable costs. are those costs which do not vary with the level of output. For example, if a firm rents a factory for $200 per week, this cost is the same whether it produces 200 items or 1000 items. Other examples of fixed costs include , telephone bills, heating and repayments.
are those expenses which do not vary directly with the level of . The buying of materials to make goods will be a cost.
Wages will also increase if workers have to work longer hours to produce more, or if more labour is hired by a firm. Variable costs appear as an sloping line on a graph whereas fixed costs appear as a straight line on a graph.