What is the difference between fixed and variable costs in construction?

Fixed costs are expenses that remain constant regardless of the level of production or activity within a construction project. This means that whether you are building one unit or several units, these costs do not change. Examples of fixed costs in construction might include rent for office space, salaries of permanent staff, and equipment leases.

In contrast, variable costs are directly linked to the level of production. They fluctuate based on how much work is being done or how many units are being produced. In a construction setting, variable costs can include materials, labor hours specifically tied to the volume of work, and other expenses that increase as more output is generated.

This distinction highlights the critical role of understanding cost behavior for budgeting, forecasting, and managing a construction project effectively. Knowing which costs are fixed and which are variable helps estimators accurately determine overall project costs and make informed financial decisions.