ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -In the case of a restaurant or grocery store, the fixed costs are lease and rent payments, property tax, insurance, interest payments etc. The variable costs can be pointed out as labor costs or wages, cost of raw materials, cost of packaging etc. All these costs vanish if the production level comes down to zero.

Detailed explanation-2: -Fixed expenses generally cost the same amount each month (such as rent, mortgage payments, or car payments), while variable expenses change from month to month (dining out, medical expenses, groceries, or anything you buy from a store).

Detailed explanation-3: -Variable costs include food, hourly wages, and utilities. These costs are harder to predict when opening a restaurant because they vary according to output. After several months, you’ll know what to expect each month.

Detailed explanation-4: -Examples of variable costs are raw materials, piece-rate labor, production supplies, commissions, delivery costs, packaging supplies, and credit card fees.