Fixed costs are costs that do not change when the level of production increases or decreases. Fixed costs remain the same for a period of time. For example, rent is a fixed cost as it does not change if a manufacture's production increases.
Some other fixed costs could include:
Interests on loan
Depreciation on assets
Variable costs are costs that change when the level of production increases or decreases. Variable costs change in line with a manufacturer's production. For example, wages is often a variable cost as if production increases, more labour hours is required to increase the volume of output.
Some other variable costs could include:
Mixed costs are costs that include both features of fixed and variable costs. For example, a telephone expense could charge a fixed line rental (fixed cost) and an additional cost based on the number of phone calls made (variable cost).
Some other mixed costs could include:
Payment Systems - often charge a monthly cost and then payment fees associated with each transaction
Test Your Knowledge!
Behavioural Costs Match Game
Match each cost to their respected behavioural cost classification.