Fixed Cost & Variable Cost

Fixed costs stay roughly the same regardless of sales volume (rent, salaries); variable costs scale directly with volume (materials, per-unit shipping, payment processing fees).

The distinction matters most for break-even and unit economics math — variable costs get subtracted per unit to find margin, while fixed costs need to be covered by total contribution across all units sold, not any single sale. A business with mostly fixed costs (software) has a very different risk and scaling profile than one with mostly variable costs (a reseller or dropshipping model), even at the same revenue and profit level.