Fixed costs remain constant regardless of production levels, such as rent and salaries, while variable costs fluctuate with production volume, such as raw materials and labor hours. A company can budget for variable costs by estimating expected production levels and related expenses. Cost-volume-profit (CVP) analysis, which includes fixed and variable costs, sales volume, and profit, is essential for determining a company's break-even point to understand profitability.

1. Explain the difference between fixed and variable costs and
give two examples of each. Can a company budget for variable
costs? Explain.
Explain the basic components of cost-volume-profit (CVP)
analysis. Why is it important to determine a company's break-
even point?