Question

Identify a situation in which rent would be fixed cost and one where it would be a mixed cost. What is the difference?

Answer 1

Rent is a fixed cost where a flat amount is levied every month. Rent can also be a mixed cost like in case of retail leasing where a fixed cost plus a certain percentage of sales revenue is charged.

In case where rent is a fixed cost, the amount is fixed and does not vary in relation to the sales. Where however, the rent is a mixed cost comprising both a fixed as well as a variable element, the amount would be determined based on the fixed component plus the percentage of sales which would vary with the sales revenue.