Fixed and variable costs

Total costs

are fixed and variable costs added together

Average costs

are total costs of production divided by the level of production or output to give the cost to give the cost of producing a single unit of output

Fixed costs

Fixed costs do not change when the business changes its level of output e.g. rent, rates and salaries.

Variable costs

Variable costs change with the business's level of output e.g. fuel costs, wages, raw materials and components.