In a training company, should i consider instructors who are on my payroll as fixed cost or variable cost?

Question

In a training company, should i consider instructors who are on my payroll as fixed cost or variable cost?

Answer 1

A fixed cost should be the same each year regardless of how much the business is making. Variable costs change depending on sales. So rent would be fixed and the cost of inventory would be variable as it changes depending on sales.

With regards to your employee I guess it depends on the type of employee the instructors are. If they are permanent employees on a salary then the cost will be the same and could be considered fixed but if they are casual and paid only for the hours worked then variable would be more appropriate.

I would make them a variable cost just because over time the cost can vary greatly and is not as set and stable as a fixed cost should be.