Mixed cost
Mixed cost contains both a fixed component, incurred regardless of activity, and a variable component that increases with each unit of activity. Total mixed cost therefore rises as activity rises, but never falls to zero.
Also known assemi-variable cost
See it move
The infographic is a cost-behaviour chart with machine-hours on the horizontal axis and total cost in euros on the vertical axis, showing a straight line that begins above the origin and rises at a constant rate. The line represents a mixed cost composed of a fixed standing charge of €400 and a variable element of €1.80 per machine hour: at 500 hours total cost reaches €1,300, and at 1,000 hours it reaches €2,200. The non-zero intercept distinguishes a mixed cost from a purely variable cost, while the positive slope distinguishes it from a purely fixed cost.
The formula
Variables
- Total mixed cost for the period (€)
- Fixed component — incurred regardless of activity level (€)
- Variable rate — additional cost per unit of the cost driver (€ per unit)
- Level of activity (machine-hours, units produced, etc.) (units / hours)
Also written Y = a + bX. The fixed and variable components must be separated (e.g. using the high-low method or regression) before they can be used for planning and control.
Check yourself
A company's telephone plan charges a fixed monthly fee of €80 plus €0.05 per text message sent. In January the company sends 3,000 texts; in February it sends 6,000 texts. What is the difference in total telephone cost between the two months?