As it is assumed that variable costs are the same per unit of activity, the total variable costs will move in direct proportion to changes in activity levels (i.e. in a linear fashion). In reality, variable costs do not strictly behave in this manner. For example, a firm may receive quantity discounts when purchasing large quantities of goods for manufacture or resale. In such cases, the cost per unit of material will not solely depend upon the activity but will also be influenced by the quantity of inputs purchased. As a result, variable costs will not behave in a linear fashion and will tend to follow a downward sloping curvilinear function. On the other hand, for some types of costs (e.g. utilities, including power and water), the variable cost per unit consumed increases at higher levels of consumption. In this case, the variable portion of the cost will tend to follow an upward sloping curvilinear function.

A fixed cost is assumed to be constant in total over all levels of output. Once again, in reality these costs tend not to be strictly linear. Fixed costs may only be fixed over a limited range of output, and behave in a stepped rather than linear function.