---
id: "prereq-variable-vs-total-cost"
type: "prereq"
source_timestamps: ["§ Avoid These Common Mistakes"]
tags: ["accounting"]
related: ["concept-variable-cost-pricing-floor"]
reason: "Required to grasp the author's argument that discounts can profitably drop below total cost as long as they clear variable cost."
sources: ["commercial"]
sourceVaultSlug: "hbr-seg-commercial"
originDay: 5
articleStem: "hbr-ext-22-art-of-discounting"
sourceUrl: "https://hbr.org/2026/05/the-art-of-discounting"
sourceTitle: "The Art of Discounting"
---
# Variable vs. Total Costs

**Prerequisite knowledge:** the distinction between **variable costs** (costs that scale with each unit produced) and **total costs** (variable costs plus fixed overhead).

**Why it's required:** the whole incremental-profit argument — [[concept-variable-cost-pricing-floor]] and [[claim-incremental-profit-variable-cost]] — depends on seeing that a discounted marginal unit only needs to clear *variable* cost, not fully-loaded cost, to add profit.