Notes CVP – ch.

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Section one- Variable, Fixed And Mixed costs
Variable costs: Variable costs are costs that vary in total directly and proportionately with changes in the activity
level. If the level increases 10%, total variable costs will increase 10%. If the level of activity decreases by 25%, variable costs
will decrease 25%. However A variable cost may also be defined as a cost that remains the same per unit at every
level of activity.

Fixed Costs: A variable cost may also be defined as a cost that remains the same per unit at every level of
activity. Because total fixed costs remain constant as activity changes, it follows that fixed costs per unit vary inversely with
activity: As volume increases, unit cost declines, and vice versa.

Mixed costs: Mixed costs are costs that contain both a variable element and a fixed element. Mixed costs,
therefore, change in total but not proportionately with changes in the activity level.

Practice 1

1
Practice 2

Practice 3

2
Practice 4

Section Two- HIGH-LOW method