Fixed Costs are costs that don’t change as you sell more units.
Variable Costs are costs that increase in total as you sell more units.
note – this is a simplified breakeven analysis, which assumes that the fixed and variable costs behave consistently across the range of units sold.
In reality, fixed costs could increase beyond certain sales volumes (i.e. needing a second factory), and variable costs could decrease per unit sold (i.e. wholesale per unit volume discounts).
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