Introduction to 1d: Fixed versus Variable Cost

This lesson discusses the segregation of costs into the mutually exclusive categories of fixed and variable. Mixed and step costs are also covered, but ultimately these are also broken down into fixed or variable.

To use this classification, one must have a very good understanding of the time frame and the relevant range. 

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Learning Objectives

After completing this lesson, you should be able to

• classify costs as fixed, variable, step, or mixed with respect to a particular cost object. Be aware that the distinction between fixed and variable costs is fundamental and is used throughout the study of cost or managerial accounting; and
• recognize how mixed and step costs are converted into fixed and variable.

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