Volume and its relationship with fixed and variable costs

Fixed costs are costs which do ·not vary with any change in the level of activity or output. Variable costs do change. These costs can be plotted on a graph, as seen in Figures 4.1 (fixed costs) and 4.2 (variable costs). Some costs remain stable for a range in the volume of activities only but once the level of activity exceeds a threshold, they go up in steps. Such costs are semi-variable. Example 5.1 brings out the fixed, variable and semi-variable costs of the operation.