Costs (Types)
**Fixed costs:** unchanged by activity (rent, salaries, insurance). **Variable costs:** change with activity (materials,...
Formula
Total Costs = Fixed Costs + (Variable Cost per Unit × Output)
Real World
Ryanair's fixed costs (aircraft leases, airport slots) remain constant regardless of passenger numbers, while variable costs (fuel per seat, in-flight snacks) rise with every flight sold.
Exam Focus
Never say rent is variable — fixed costs do not change with output; confusing this is the most common error in cost questions.
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