What is a mixed cost?

A mixed cost is a combination of fixed and variable costs. It has elements of both types of costs and cannot be easily classified as purely fixed or purely variable. A mixed cost is also referred to as a semi-variable cost.

The fixed component of a mixed cost is constant regardless of the level of production or sales, whereas the variable component increases or decreases in proportion to the level of production or sales. The fixed component includes costs not directly related to production or sales, such as rent and salaries. The variable component includes costs that directly vary with the level of production or sales, such as raw materials and direct labor.

Mixed costs are common in businesses where there are both direct and indirect costs associated with production. They can be difficult to budget and analyze as they involve both fixed and variable costs, and may require special techniques to separate the two components. One method used to separate mixed costs is the high-low method, which involves analyzing the costs at the highest and lowest level of activity and separating the fixed and variable components based on the difference between the two.