Mixed cost

Definition

A mixed cost contains both fixed and variable components:

Total cost = Fixed part + (Variable rate × Activity)

Example: RM1,200 per month + RM0.10 per kWh.

Facts (core points)

• Total rises with activity; per-unit falls as volume increases (because the fixed part is spread).
• Common in utilities and services (two-part tariffs: base fee + usage fee).
• For analysis (e.g., CVP), you usually separate mixed costs into fixed + variable using High–Low, regression, account analysis, or engineering estimates.
• “Mixed” is different from step-fixed (jumps at capacity blocks) and from pure variable (no fixed base).

Elaboration

• Why it matters: You need the split to compute contribution margin, break-even, pricing, and to predict how costs change with volume.
• Relevant range: The variable rate and base fee are assumed stable only within normal capacity. Bulk discounts, overtime, or tiered tariffs can change the rate.

Tiny numeric illustration (High–Low method)

A delivery firm’s monthly vehicle cost:

• Low: 2,000 km → RM3,400
• High: 5,000 km → RM5,800

Compute variable rate 𝑣:

Difference in cost = RM5,800 − RM3,400 = RM2,400

Difference in km = 5,000 − 2,000 = 3,000 km

𝑣 = 2,400 ÷ 3,000 = RM0.80 per km

Find fixed part 𝐹 using the high point:

Total =  𝐹 + 𝑣𝑋 = 𝐹 + 0.80 × 5,000 = 𝐹 + 4,000

So F = 5,800 − 4,000 = RM1,800

Cost equation: C = 1,800 + 0.80 × km

Examples (by context)

Context	Mixed Cost (structure)	Activity Driver
Electricity (factory/office)	Base meter charge + RM per kWh	kWh
Telecom/call centre	Line rental + per-minute charge	Minutes/calls
Cloud/SaaS ops	Base server plan + per-GB/API call	Usage units
Logistics fleet	Insurance/road tax + fuel/tyres per km	Kilometres
Manufacturing maintenance	Core team salaries + parts/overtime per machine-hr	Machine-hours
Hotel laundry	Contract retainer + per-kg linen	Kg processed
University short courses	Coordinator salary + adjunct hours/materials per student	Students/hrs
Archery club ops	Field lease retainer + target faces/assistants per session	Sessions/archers

Quick exam tips

1. Define mixed cost and write the equation.
2. Show the split (e.g., High–Low with neat arithmetic).
3. State the driver & relevant range.
4. Contrast with pure fixed, pure variable, and step-fixed.