Hey, it’s Jerryy Garrett, back with this week’s post. I learned about different types of costs in my MBA, and I’ll share that with you. There are two main types:
Fixed and variable costs.
First, fixed cost. No matter if you make a million dollars in profits or losses, you still have to pay the same amount. Like for example paying salaries to your employees, or even rent to your office. It is a fixed amount that you pay.
The amount may change but not often—maybe every two years or so. That’s still a fixed cost because it doesn’t change every week or every month. Now let’s move onto the next type of cost
The second one which is, Variable cost. It depends on something like revenue. If I make good money, I can buy more materials for my clothes. But if I don’t make much revenue, I can’t buy as many materials. So that’s variable cost.
And also, here’s a fun visual I made to explain both of these:
To simplify: fixed cost isn’t related to revenue; variable cost is.
And by the way; this topic is from the PersonalMBA book my Josh Kaufman check the original concept from him here: https://personalmba.com/costs-fixed-variable/
That’s all for this week. See you next week!
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