Fixed and variable costs are really important in figuring out how much money a company makes. Let’s break down how these costs work:

Fixed Costs:
These are costs that don’t change, no matter how much a company produces.
Think of things like rent. The company has to pay rent even if it’s not selling anything.
If sales are low, these fixed costs can make it hard for the company to make a profit.

Variable Costs:
These costs change depending on how much a company produces.
For example, if a company makes more products, it needs to buy more raw materials.
So, as production increases, variable costs go up. This means the company might not make as much profit on each sale.

To find the Total Revenue (TR), you can use this formula:
Total Revenue = Price × Quantity

If variable costs are high, the company might not make as much money, even if the total revenue looks good.
That’s why it’s really important for companies to keep track of both fixed and variable costs.