Fixed Or Variable Costs And Benefits

 Some costs and benefits are constant, regardless of how well a system is used. Fixed costs (after the {act are sunk costs. They are constant and do not change. Once encountered, they will not recur. Examples are straight-line depreciation of hardware exempt employee salaries, and insurance. In contrast, variable costs are incurred on a regular (weekly, monthly) basis. They are usually proportional to work volume and continue as long as the system is in operation. For example, the costs of computer forms vary in proportion to the amount of processing or the length of the reports required.

Fixed benefits are also constant and do not change. An example is a decrease in the number of personnel by 20 percent resulting from the use of a new computer. The benefit of personnel savings may recur every month Variable benefits, on the other hand, are realized on a regular basis. For example, consider a safe deposit tracking system that saves 20 minutes preparing customer notices compared with the manual system. The amount of time saved varies with the number of notices produced.