fixed cost vs. Variable cost

Question

What exactly is the difference between fixed cost and variable cost in business?

An example would be greatly appreciated

Answer 1

Fixed cost is a cost that stays the same no matter what, where variable cost can vary. An example would be you are in a business that prints t shirts. Each time you want to print a batch of shirts, it costs you $20 to set up the machine no matter how many shirts you print. That would be a fixed cost. The variable cost would be base on the number of shirts you print. The cost to print a shirt, materials and supplies is $5 per shirt.

If you print 50 shirts, the total cost would be:

$20 + $5(50) = $120

If you print 100 shirts, the total cost would be:

$20 + $5(100) = $520