5.4.1—Cost information

Costs are sacrifices incurred to produce or sell output. Fixed costs do not change directly with output in the short run; variable costs change with activity; total cost combines both.

Classifying costs helps price, budget, outsource, compare options and assess break-even. A cost can behave differently at different scales or time horizons.

Rent may be fixed within current capacity, while packaging rises with units. If a second site is opened, rent may become a step cost.

Fixed does not mean permanent, and variable does not mean every unit costs exactly the same.