| Basis of Difference | Fixed Costs | Variable Costs |
| 1. Transformation | Fixed costs do not change with change in quantity of output. | Variable costs change with change in quantity of output. |
| 2. Period | It is a long period concept. | It is a short period concept. |
| 3. Situation of zero | Fixed costs remain the same whether output is zero or maximum. | Variable cost as zero when output is zero. These costs increase when output increases and decrease when output decreases. |
| 4. Factors | It is related to the fixed factors. | It is related to the variable factors. |
| 5. Continuance | A firm can continue production even if there is loss of fixed costs. | Production will be continued by a firm, only if its variable costs are recovered. |
| 6. Examples | Rent, wages of permanent staff, license fee, cost of plant and machinery, etc. | Cost of raw material, wages of casual labour, expenses on electricity, etc. |
