Fixed and Variable Costs

There are two main types of cost which are Fixed or Variable costs.  If something is being manufactured it consists of both fixed and variable costs.  Fixed costs are those cost that do not change based on a quantity.  That basically means the cost is fixed if you product 1 or 1000 pieces.  Some of these costs would be security, taxes, insurance and administration costs.   These costs are called Fixed because they do not vary with the quantity being manufactured or the level of production.  Variable costs do vary based on quantity and level of production.  Some examples of variable costs are direct material and direct labor costs.

There is a third category of fixed and variable costs which is often referred to as mixed costs.  Mixed costs are simple costs that are part variable and part fixed.  Example would be a heating oil or gas, there is a fixed amount that would be used regardless if the machines are running just to keep the building warm.   The variable costs would be the amount of oil consumed by the machine.

MIE Solutions provides a great solution to manage and organize all the costs required including both fixed and variable costs.

Try this estimating software.


Author: MIE Solutions

David Ferguson has over 20 years of experience in the manufacturing and fabrication industry. David Ferguson has been to over 100 manufacturing companies helping and guiding them to be more efficient and cost effective. As a child in Junior High School David Ferguson found a passion for the early computer systems, which would drive much of his future work. David Ferguson created and sold his first computer program, Arrow Data Systems, which was an early CAD/CAM system for the Apple 2e Computer. In the late 1980's after seeing his father (a sheet metal manufacturer) come home many nights estimating, David Ferguson saw an opportunity to optimize his effort through computer technology. Shortly thereafter the FabriTRAK Production Control package was developed. The Quote It! estimating package was developed out of the FabriTRAK system to become one of the leading sheet metal estimating packages in the world. David Ferguson has always had a passion for developing software to make the manufacturing process simpler, faster and more efficient. Prior to founding MIE Solutions David Ferguson worked with his father at Alco Sheet Metal, METALSOFT Inc. and was a consultant at Toyota Motors Sales. David Ferguson has his Masters in Computer Science and Mathematics from California State University, Long Beach.

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