Variable costs. The total amount of a variable cost increases in proportion to the increase in an activity. The total amount of a variable cost will also decrease in proportion to the decrease in an activity.

Fixed costs. The total amount of a fixed cost will not change when an activity increases or decreases.

Mixed or semivariable costs. These costs are partially fixed and partially variable.

Breakeven Point (BEP) In accounting, the breakeven point formula is determined by dividing the total fixed costs associated with production by the revenue per individual unit minus the variable costs per unit. In this case, fixed costs refer to those which do not change depending upon the number of units sold. Put differently, the breakeven point is the production level at which total revenues for a product equal total expenses.

(1Which one of these costs is the most influential to the company's break-even point?

2Are companies with high fixed costs but low variable costs better off than those with low fixed costs but high variable costs?

3If you were a business owner, which one would you prefer?