What are fixed costs and variable costs

Variable costs and fixed costs: differences and examples

What are fixed costs?

According to the definition, fixed costs are expenses that incurred continuously and regardless of factors such as capacity utilization and production are. These include, for example:

  • Rent for offices or production rooms
  • Insurance
  • wages the company management and other permanent employees
  • Energy coststhat are not dependent on production, for example the lighting of the offices
  • Payments for maintenance and cleaning
  • Tax advice

Such fixed loads can generally be reduced less quickly than variable ones. If your company has a high basic amount, it is less flexible. But there is one advantage: The basic expenses arecalculable in the long term.

Also interesting: reduce non-wage labor costs

>> Save costs now with Seneca Controlling

What are variable costs?

Variable costs are against it depending on the production or the services provided by your company. They usually rise or fall according to the number of goods produced. Examples are:

  • Wagesthat are influenced by the order situation and therefore fluctuate, for example in piece work.
  • Energy costs for machine operation: They only arise when work is in progress, and the amount depends on the workload.
  • Fuels: Expenditures for this depend on the actual mileage.
  • raw materials: Often variable prices apply depending on the amount purchased.

Variable expenses can usually be influence more easily and quickly as fixed. For theirmanagement it is therefore important to calculate them regularly and use the control options that they offer. That too marketing should deal with it. In the best case, the end result is a product sale that offers you the best ratio of sales and costs.

Also interesting: Save time - it's that easy

Smooth transition: mixed costs

However, not all expenses can be clearly assigned to one or the other category. In such cases, one speaks of mixed costs. This is particularly evident when you post forenergy: It consists of both one Basic charge as well as one consumption-dependent share. The former remains relatively constant over a longer period of time and therefore belongs in the drawer with fixed costs. Expenses for the operation of production machines, on the other hand, are variable costs because they fluctuate depending on the production volume.

Practical application: cost and performance accounting

Cost and performance accounting is an important part of accounting and helps you to achieve that Spending structure To see through your company. So you also have the Basis for your price calculation. In the Contribution margin calculation subtract the variable costs from the sales proceeds. What remains is the contribution margin with which you can pay the fixed expenses. So your company has to calculate its prices in such a way that it earns The contribution margin for the fixed costs is sufficient. Accordingly, a product with a high contribution margin is particularly valuable for your company.

Also interesting: lower personnel costs with efficient absenteeism management

Minimize fixed costs

Just around to save in the long term, it is worthwhile for you to take a close look at the fixed costs. They can be partlyconvert into variable costswhich gives you more financial flexibility for your company. To do this, you should first use the Calculate fixed costs, identify particularly expensive areas and check their savings potential. Three examples you can start with:

  • Sales-dependent salaries: Link your staff costs to theworkload Of your company, then some of them become variable costs. The Motivate your employees thereby increase even more. Make sure, however, that the workforce does not become too insecure.
  • Flexible working time modelswho have favourited you adapted to the order situation. You avoid new hires at peak times and layoffs when the order numbers plummet.
  • Outsourcing: You may be able to do that too Outsourcing of an entire area New opportunities. Disadvantage of the measure: It means major restructuring and more dependence on external service providers.