If you own a business or have just started doing business, you’ll probably come across the terms fixed cost and variable cost quite often. I understand that it may seem complicated at first, but once we understand the principles, it will help us manage our business much better.

What exactly does ต้นทุนคงที่ mean? It refers to costs that do not change no matter whether we produce or sell more or fewer goods. No matter whether the business is operating or temporarily paused, these costs still have to be paid the same way—such as office rent, salaries of full-time employees, insurance, loan interest, and depreciation of equipment.

Why do we need to know this? Because it affects decisions about pricing products. Once we know what the fixed cost is, we can calculate a selling price that covers the basic costs and generates profit.

Variable costs, on the other hand, are the opposite. They change according to the amount of production or sales. When production increases, costs rise; when production decreases, costs fall. For example, raw material costs, direct labor costs, packaging costs, shipping costs, and sales commissions.

The key difference is that fixed cost refers to an obligation that must be borne whether there is revenue or not, while variable cost is an expense that is flexible and can adjust based on demand.

When we combine these two types, we get the total cost of running the business—and this is very important information for various decisions, such as whether to invest in machinery. This is because it may reduce variable costs but increase fixed costs; or whether to increase the volume of production, since we need to consider how both costs will change.

If you can manage both types of costs effectively, your business will have financial stability and be more competitive in the market.