What is a mixed-cost?

A mixed cost is a cost that contains both variable and fixed costs (see my previous two posts for more on these). Utility bills traditionally were a food example of a mixed cost. Take a telephone bill. Traditionally, a phone bill had a fixed cost which you had to pay even if you made no calls – the line rental in other words. Then you paid for each call, and the more calls you made the greater the total cost – in other words the call cost was variable. Nowadays phone bills tend to be fixed costs – all calls, line rental and Internet are bundled together into a flat monthly charge. Electricity and gas bills still tend to have a small fixed cost – the standing charge – which is paid regardless of use.