The major difference between fixed costs and variable costs is simple to understands as the former are costs which remain constant while the latter relates to costs which vary in proportion to aspects such as sales or production levels. Fixed costs may include those which are paid at a fixed rate similar to when one is paying a direct debit that is set at the same specific price each month. Examples of fixed costs are areas such as rent, insurance, loan interest and staff remuneration.

Variable costs may include things like overtime wages, essential stationery, petrol as well as other business costs. These costs may also include advertising and are relate to how productive the business is and budgets.

As highlighted above, costs within the business environment may be categorised into three main groups which include fixed and variable costs, those which are direct and indirect as well as capital and revenue expenditure.