FIXED AND VARIABLE COST

BY: NICOLE SAVINDA

LABOR EXPENSES

Salaries
 Why is this a Fixed Cost?
Includes only those employees whose  Same payout every month
income is based on a monthly or yearly
 Based on a set number of
salary.
employees
Does not include any employee who is
 Long term
eligible for overtime pay.
WHAT IS A FIXED COST?

 Expenses that do not change with output, often part of a long-term agreement
 Examples of fixed costs:
 Senior Management Salaries
 Rent/Mortgage
 Insurance
 Building and/or Equipment Depreciation
WHAT IS A VARIABLE COST?

 Expenses that increase and decrease based on output

 Examples of variable costs:
 Hourly salaries
 Supplies
 Taxes
 Utility bills
LABOR EXPENSES (CONTINUED)

Benefit Expense  Why are these Fixed Costs?

 Payment is the same every month
Medical Insurance
 Based on a number of employees
Dental Insurance  Remains the same for a period of
time
Vision Insurance
 VARIABLE COSTS:

SUPPLY Office Supplies

General Medical Supplies (expendables)
EXPENSES
Large Supply unique to Test A
Large Supply unique to Test B
Large Supply unique to Test C
 FIXED COST
OTHER
EXPENSES  Maintenance Contracts – Departments Equipment
 Consultant Contracts
 Depreciation – Department Equipment
 VARIABLE COSTS

OTHER  Utilities (Allocated by Sq Ft)

 Maintenance (non-contract)
EXPENSES
(CONTINUED)  Other Allocated Expenses (Allocated by Sq
Ft)
REFERENCES

 Ross, Thomas K. (2019). A Comprehensive Guide to Budgeting for Health Care Managers. Burlington, MA.
Jones and Bartlett Learning.
 What is Fixed Cost vs Variable Cost. Retrieved from https
://www.freshbooks.com/hub/accounting/fixed-cost-vs-variable-cost#:~:text=Fixed%20cost%20includes%20expen
ses%20that,direct%20labor%2C%20taxes%2C%20and%20operational
 The Importance of Variable Cost Structures in Medical Practices. Retrieved from
http://info.bhnco.com/blog/the-importance-of-variable-cost-structures-in-medical-practices
 Nickolas, Steven. (2020). Variable Cost vs. Fixed Cost: What’s the Difference? Investopedia.
https://www.investopedia.com/ask/answers/032515/what-difference-between-variable-cost-and-fixed-cost-econom
ics.asp
 What is Cost Behavior? Retrieved from https://www.accountingcoach.com/blog/what-is-cost-behavior