Analyze Accounts to Separate Mixed Costs into Variable and Fixed Components

Use your knowledge of operations and your common sense to classify each account as variable or fixed.

Variable costs change with the cost driver, but fixed costs don’t.

If appropriate, you can classify some accounts as mixed and then assign percentages of each that are variable and fixed. For example, an account may be 50 percent variable and 50 percent fixed.

blog comments powered by Disqus
Advertisement

Inside Dummies.com