Explain the difference between fixed and variable costs in a business context.

Fixed costs remain constant regardless of production or sales volume, such as rent, salaries, and insurance premiums. These costs do not fluctuate with changes in activity levels. On the other hand, variable costs vary proportionally with production or sales volume, such as raw materials and direct labor. Understanding the distinction between fixed and variable costs is crucial for businesses to accurately forecast expenses, perform cost-volume-profit analysis, and make informed decisions about pricing, production levels, and profitability.