The terms Fixed Costs and Variable Costs look at the behavior of the costs - do the costs vary with Sales Volume?
Variable Costs do vary with the Sales Volume. If Sales double from one month to the next, then the Cost of Sales will also double. Cost of Sales is a Variable Cost.
Fixed Costs do not vary directly with Sales Volume; they are approximately the same from month to month (they are ‘fixed’). Examples include R&D, advertising, non-production personnel, training, and rent for the corporate offices.
Note: Advertising is considered a Fixed Cost. An increase in Advertising might lead to higher sales or it might not. There is no direct relationship - doubling the Advertising spend will not double Sales Volume.
Note: The terms Overhead(s), Operating Expense (OpEx), Indirect Costs, and Fixed Costs are very similar. Check how each term is used in your company.
See also Variable Costs and Semi-Variable Costs.
term list.