234 FInAnCIAl MAnAGEMEnT FoR non-FInAnCIAl MAnAGERS Case 15: high levels of fixed costs when income is variable can cause failure We have discussed the difference between fixed costs (those that remain fixed when sales or production increases) and variable costs (those that change with sales or production activity). A company that has a high proportion of its costs fixed during a period of time when it cannot be sure of sales income for the same period is extremely vulnerable. It has a `mis-match' between fixed costs and variable income, so that if sales fall it will be left with costs it cannot afford to cover. It may go broke very quickly. In June 2011 the case of Southern Cross in the UK demonstrated this basic trap that organizations often fall foul of. That is having overheads that are fixed or rising at a time when revenues are under pressure to remain constant or fall. Southern Cross had rented property at a fixed or increasing level at a time when its income was constrained.