Fixed, Variable & Step Costs
How each cost moves when the business gets busier.
In your head, jot if needed · no calculator why?
Opens at level 13.
Lesson and untimed practice
Read the full lesson and try each skill without a clock. About 3 minutes to read.
skills · practice stats
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Split a mixed cost not tried yet
worked example
A forklift rental costs $550 per month plus $34 per hour of use. Last month the forklift was used for 20 hours. How much of last month's bill was fixed?
Answer: $550.00
- The fixed part is the $550 monthly fee; the $34 × 20 = $680 is the variable part.
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Classify the cost not tried yet
worked example
A florist's delivery contract costs $150 a month plus $3 per stop. How does this cost behave as activity changes over the next few months?
- Variable
- Step
- Fixed
- Mixed
Answer: Mixed
- A monthly fee plus a per-stop part makes it mixed.
- Fixed stays flat, variable moves with every unit, mixed is a base plus a per-unit part, and step jumps in chunks when capacity runs out.
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Step costs: how many do you need? not tried yet
worked example
One van can handle at most 15 deliveries a day. How many vans are needed for 178 deliveries a day?
Answer: 12
- Divide and round up: 178 ÷ 15 ≈ 11.87, so 12.
- 11 vans would leave 13 deliveries uncovered. You can't lease part of a van, so this cost jumps in steps.
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Total cost at a volume not tried yet
worked example
A print shop has fixed costs of $9,300 a month and variable cost of $3 per order. What is total cost for a month with 1,270 orders?
Answer: $13,110.00
- Total = fixed + rate × volume = $9,300 + $3 × 1,270 = $9,300 + $3,810 = $13,110.
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