2. Fixed costs attach to the
enterprise as a whole.
They don`t change in
proportion to change in
quantity sold or produced
To involve premises,
insurance, interest on loans,
salaries of employees, rent
and rates.
Fixed cost may change in a
long time; eg. The rent of
factory
3. To change according to the
number of products a
business produces.
They are goods or service
produced that have to be
paid
Eg. raw materials, employees
wages
The formula for total cost is:
Total cost= fixed cost +
variable cost
4. To involve directly in the
production process.
To include raw material
and components, the
labor of the employees
5. They don`t involve
directly in the productions
process.
To include administrative
costs such as the salaries
of supervisors, managers,
rent and rates, advertising
and marketing,
telephone, gas, and
electricity
