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Cost behaviour: fixed, variable, semi-variable and semi-fixed costs

Edexcel IAL Accounting · WAC12 Corporate and Management Accounting

Break-even analysis and marginal costing depend on classifying costs by how they behave as output changes. Examiners report that misclassifying costs as fixed or variable loses marks in break-even questions.

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Four types of cost

Type	Behaviour	Examples
Fixed	Total stays the same as output changes (within the relevant range); cost per unit falls as output rises	Rent, insurance, salaries, depreciation (straight line), loan interest
Variable	Total rises in direct proportion to output; cost per unit is constant	Raw materials, piece-rate labour, sales commission, packaging, fuel per mile
Semi-variable	A fixed element plus a variable element: a straight line that starts above zero	Telephone or electricity with a standing charge; salesperson on basic pay plus commission
Semi-fixed (stepped)	Fixed over a range of output, then jumps to a new level	Supervisors (one per 10 workers), an extra delivery vehicle, extra coaches for a tour company

Do not confuse the two 'semi' costs

Semi-variable = straight line rising from a fixed starting point. Semi-fixed = steps. The June 2025 examiners had to remind candidates that semi-fixed costs rise in steps, unlike semi-variable costs, which rise in a straight line.

Selling price and net profit

Total cost = fixed costs + variable cost per unit x units
Revenue = selling price x units
Net profit = revenue - total cost = (selling price - variable cost per unit) x units - fixed costs

Read the question carefully for how many people or items a cost applies to: an October 2022 question had five staff, not one.

Worked example

A café has rent of £2,000 a month, a manager paid £2,400 a month, food costing £1.80 per meal, and electricity of £150 a month plus £0.10 per meal. It sells 4,000 meals at £6.50. Calculate net profit.

Fixed costs = 2,000 + 2,400 + 150 = £4,550
Variable cost per meal = 1.80 + 0.10 = £1.90
Revenue = 4,000 x 6.50 = £26,000; variable costs = 4,000 x 1.90 = £7,600
Net profit = 26,000 - 7,600 - 4,550

Answer: £13,850

Key idea: Fixed costs do not change with output; variable costs change in proportion; semi-variable = fixed part + variable part; semi-fixed = steps. Profit = (price - variable cost per unit) x units - fixed costs.

Check yourself

Fixed costs are £18,000 and variable cost is £7 per unit. Calculate the total cost of making 3,500 units.
Show answer
£42500. 18,000 + 24,500 = £42,500.
Selling price £22, variable cost £13 per unit, fixed costs £40,500. Calculate net profit when 6,000 units are sold.
Show answer
£13500. 9 x 6,000 - 40,500 = £13,500.
A shop employs 5 staff, each paid £1,800 a month, and pays rent of £3,000 a month. What are its monthly fixed costs?
Show answer
£12000. 5 x 1,800 + 3,000 = £12,000.
Fixed costs are £24,000. What is the fixed cost per unit at 8,000 units?
Show answer
£3.00. 24,000 / 8,000 = £3.00 per unit.
A mobile phone contract costs £15 a month plus 5p per minute. What type of cost is it?
- Semi-fixed
- Semi-variable
- Fixed
- Variable
Show answer
Semi-variable. A fixed element plus a variable element.
A coach company needs one extra coach for every 50 passengers. What type of cost is the coach hire?
- Semi-variable
- Variable
- Fixed at all levels of output
- Semi-fixed (stepped)
Show answer
Semi-fixed (stepped). The cost jumps each time another 50 passengers are added.
As output rises, what happens to fixed cost per unit?
- It rises
- It falls
- It stays the same
- It becomes variable
Show answer
It falls. The same total is spread over more units.

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Last updated 8 November 2026. Spotted a mistake? Tell us.