What is Fixed vs Variable Costs?
- Fixed vs Variable Costs
- Fixed costs remain constant regardless of production volume (rent, salaries, depreciation), while variable costs change directly with output (raw materials, direct labour, packaging).
Cost Classification in Manufacturing
In a manufacturing business: Fixed — factory rent, equipment depreciation, permanent staff salaries. Variable — raw material cost, direct labour (if piece-rate), power consumption, packing material. Semi-variable (mixed) — some utilities have a fixed base charge plus a variable usage component.
Cost Classification in ERPNext
Use ERPNext's Accounting Dimensions or Cost Centres to tag expenses as fixed or variable. Configure reports to show cost per unit of output (variable cost analysis). BOM costing in ERPNext can separate fixed operation cost from variable material cost for accurate product pricing.
Infonoxe Technologies specialises in ERPNext implementation and custom software for Indian businesses.
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