Fixed and Variable Cost Model
Build a cost forecast from a fixed amount and a variable rate linked to revenue.
Fixed amount + revenue-linked cost
Synthetic example · EUR thousands; other units as labeledCalculated model excerpt
| Input / result | 2026E | 2027E | 2028E |
|---|---|---|---|
| Revenue reference | 1,000.00 | 1,200.00 | 1,400.00 |
| Fixed overhead | 300.00 | 300.00 | 300.00 |
| Variable rate · % | 20.00 | 20.00 | 20.00 |
| Variable cost | 200.00 | 240.00 | 280.00 |
| Total cost | 500.00 | 540.00 | 580.00 |
| Cost / revenue · % | 50.00 | 45.00 | 41.43 |
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How should one mixed cost line scale?
Example Company forecasts Cost Line A for 2026–2028. The task is to construct costs when one part stays fixed and the other follows Business Line A’s revenue. The broader Operating Expense Model owns the overhead plan; this example isolates a single mixed line.
Specify the fixed amount, reference and rate
All money is EUR thousands. Each full calendar year has fixed cost 300 and a variable rate of 20% of Business Line A’s revenue. Base revenue is 1,000, 1,200 and 1,400. A manually defined Downside path is 800, 900 and 1,000. The same fixed amount and rate apply in both paths. Opening balances, COGS, depreciation, taxes, investment and working-capital inputs are zero.
The existing fixedVariable driver evaluates fixed amount + reference × rate / 100. Here the reference is the explicit revenue object, not an inferred activity measure. Fixed 300 is a per-period amount: because every period is a full year, it is also the annual amount.
Reconcile the two cost paths
Base cost is 300 + 20% × revenue: 500, 540 and 580. Downside cost is 460, 480 and 500. The rate is unchanged; total cost divided by revenue is not. Base cost ratios fall from 50% to 45% to 41.43%, while the Downside path gives 57.50%, 53.33% and 50%.
The remaining margin in this deliberately isolated model is revenue less Cost Line A. Base EBIT margins are 50%, 55% and 58.57%; Downside margins are 42.50%, 46.67% and 50%. These are consequences of this cost construction, not a complete profitability diagnosis. Operating Leverage Analysis owns the separate interpretation of sales-to-EBIT changes.
Base · mixed cost forecast
| Input / result | 2026E | 2027E | 2028E |
|---|---|---|---|
| Revenue reference | 1,000.00 | 1,200.00 | 1,400.00 |
| Fixed overhead | 300.00 | 300.00 | 300.00 |
| Variable rate · % | 20.00 | 20.00 | 20.00 |
| Variable cost | 200.00 | 240.00 | 280.00 |
| Total cost | 500.00 | 540.00 | 580.00 |
| Cost / revenue · % | 50.00 | 45.00 | 41.43 |
| EBIT | 500.00 | 660.00 | 820.00 |
| EBIT margin · % | 50.00 | 55.00 | 58.57 |
Downside · same fixed amount and rate
| Input / result | 2026E | 2027E | 2028E |
|---|---|---|---|
| Revenue reference | 800.00 | 900.00 | 1,000.00 |
| Fixed overhead | 300.00 | 300.00 | 300.00 |
| Variable cost | 160.00 | 180.00 | 200.00 |
| Total cost | 460.00 | 480.00 | 500.00 |
| Cost / revenue · % | 57.50 | 53.33 | 50.00 |
| EBIT | 340.00 | 420.00 | 500.00 |
| EBIT margin · % | 42.50 | 46.67 | 50.00 |
Cost scaling: why a flat 50% assumption misstates the line
A pure 50%-of-revenue method matches the Base starting cost of 500. It then predicts 600 and 700, overstating the mixed line by 60 and 120. In the Downside path it predicts 400, 450 and 500, understating the first two costs by 60 and 30. Matching one starting ratio does not preserve the relationship when a fixed component stays in place.
Only the 20% variable component scales here. A 200 revenue increase adds 40 cost; it does not add 100 as the calibrated 50% shortcut would suggest. Choose the reference to reflect your supplied operating assumption, rather than applying a percentage because it fitted one year.
Base · mixed cost vs 50% of revenue
| Input / result | 2026E | 2027E | 2028E |
|---|---|---|---|
| Revenue reference | 1,000.00 | 1,200.00 | 1,400.00 |
| Total cost | 500.00 | 540.00 | 580.00 |
| 50% of revenue | 500.00 | 600.00 | 700.00 |
| 50% less mixed cost | 0.00 | 60.00 | 120.00 |
Downside · mixed cost vs 50% of revenue
| Input / result | 2026E | 2027E | 2028E |
|---|---|---|---|
| Revenue reference | 800.00 | 900.00 | 1,000.00 |
| Total cost | 460.00 | 480.00 | 500.00 |
| 50% of revenue | 400.00 | 450.00 | 500.00 |
| 50% less mixed cost | -60.00 | -30.00 | 0.00 |
Reproduce the supported construction
1. Download the native mixed-cost example. Open the financial model and explicitly select Manage models → Import. Switch to Advanced and select the Base and Downside scenarios to compare revenue and Operating Expenses. The file contains the existing fixedVariable method with fixed 300,000 EUR, rate 20 and a reference to Business Line A. The CTA does not import it.
2. The current method picker does not expose a fixedVariable editor. To rebuild the same totals through the interface, create a blank model with first year 2026, zero actual years, three forecast years, December year-end, EUR and thousands. Under Revenue → Model add Business Line A using Amount: 1,000, 1,200 and 1,400.
3. Under Operating Expenses → Model add two ordinary lines: fixed overhead with Amount 300 in each year, and variable overhead with Percentage of Reference, reference Business Line A and rate 20%. Both lines must contribute to the detail-owned total. In the Downside scenario override only revenue to 800, 900 and 1,000. Keep other inputs zero and compare combined cost with the tables. This two-line construction is equivalent for these assumptions; it does not create a new mixed-cost editor.
Limits and the next modeling question
The driver is linear. It does not classify costs, add capacity steps, estimate thresholds or optimize the budget. Replacing an imported driver’s method changes its construction. For delivery costs use COGS Model; for the revenue reference use Revenue Model. The Gross Margin page concerns direct-cost margin, while the Financial Operating Model combines the wider forecast.