What are behaviour costs?

Behavioural costs refer to the nature of costs and how they change with production or sales.

Fixed Costs

Rent is a fixed cost as it is the same amount each week, no matter how many sales or items are produced

Fixed costs are costs that do not change when the level of production increases or decreases. Fixed costs remain the same for a period of time. For example, rent is a fixed cost as it does not change if a manufacturer's production increases.

Some other fixed costs could include:

• Marketing/advertising fees

• Insurance

• Interests on loan

• Depreciation on assets

Variable Costs

For a taxi business, fuel is a variable cost as the more trips a taxi driver does, the higher the income and higher the fuel cost due to the increase in driving.

Variable costs are costs that change when the level of production increases or decreases. Variable costs change in line with a manufacturer's production. For example, wages are often a variable cost if production increases, more labour hours are required to increase the volume of output.

Some other variable costs could include:

• Electricity

• Fuel costs

• Water consumption

Mixed Costs

Mixed costs are costs that include both features of fixed and variable costs. For example, a telephone expense could charge a fixed-line rental (fixed cost) and an additional cost based on the number of phone calls made (variable cost).

Some other mixed costs could include:

• Payment Systems - often charge a monthly cost and then payment fees associated with each transaction.

• Water - Often includes a monthly service fee plus an additional cost per litre used.

• Electricity - Monthly fixed cost to use the power lines plus an additional cost for each watt of electricity used.