comparison
Fixed costs vs variable costs
By Shivam Bhandari · Reviewed 31 October 2026 · How we write
Fixed costs stay the same regardless of sales; variable costs change with every unit sold. The mix determines your break-even point and risk.
Side-by-side comparison
| Aspect | Fixed costs | Variable costs |
|---|---|---|
| Changes with sales | No | Yes |
| Examples | Rent, salaries, insurance, software | Raw materials, packaging, delivery, commission |
| Effect on risk | High fixed costs raise risk when sales fall | Variable costs scale down with sales |
| Effect on profit at scale | Spread over more units, raising profit | Stay the same per unit |
Which should you choose?
Favour fixed costs when
- · Demand is predictable.
- · You want profits to scale quickly.
Favour variable costs when
- · Demand is uncertain.
- · You're starting out.
the verdict
Early-stage businesses should keep fixed costs low; mature businesses with steady demand can use fixed costs to gain scale.
Frequently asked questions
Is salary a fixed or variable cost?
Fixed salaries are fixed costs; commissions and hourly pay tied to output are variable.
What are semi-variable costs?
Costs with a fixed base plus a variable part, like electricity with a fixed charge and usage charges.
How do fixed costs affect break-even?
Higher fixed costs raise the number of sales needed to break even.