UNIT 1 IP ACC

UNIT 1 IP ACC

Fixed and Variable Costs

The by the sum of its variable and fixed costs . The said two type of cost depends on the level of sales volume . There are instances that in the long run , variable costs becomes fixed costs . Like when the company agreed to pay the and hire the CEO for ten years , then , the costs of labor of the CEO serves as a fixed costs for the company since it was agreed that the contract would last in ten years regardless even if the company

faces a financial crisis or depression

Variable cost is defined as the factor of production that changes according to the level of production like the costs of labor , input costs etc ADDIN EN .CITE investorwords .cominvestorwords .comvariable cost12007 August 20 2007http /www .inves torwords .com /5221 /variable_cost .html (investorwords .com , 2007b . In other words , variable cost is flexible for every corresponding change in the condition of the market ADDIN EN .CITE KingWilliam KingFixed and Variable Costs12007August 20 2007http /william-k ing .www .drexel .edu /top /Prin /txt /Cost /cost2 .html (King , 2007

Fixed cost is the part of the the variable costs like land , building , tax etc . it is the costs the needed to be fulfilled first before the variable costs ADDIN EN .CITE investorwords .cominvestorwords .comfixed cost2007August 20 2007http /www .inves torwords .com /1992 /fixed_cost .html (investorwords .com , 2007a . Fixed costs is also covered if the company or the business only break-even in the operation . Another definition would be , a long term costs that can only be recovered through exhausting them in making of the goods or merchandise of the company ADDIN EN .CITE teneric .co .ukteneric .co .ukWhat costs are fixed12007August 20 2007http /www .tener ic .co .uk /nl110204 .html (teneric .co .uk , 2007

For instance , labor is more flexible than with machineries . It is very easy for us to change the designated assignment of responsibility in the production line , while machinery needs much more commitment since we have to make necessary adjustments first in to for the machines to be qualified into performing the work

According on the situation , the concerned company is a restaurant with annual sales of 1000 units of their goods . Moreover , it is also included in the situation that the costs 650 while the building rent would be equal to 9000

Based from the given data above , we can say that the producing 1000 units of their goods is equivalent to 9650 . It is obvious that the variable costs here is the costs of the raw materials that were use in making hamburgers since it is easy for us to change the raw materials that were going to use in making hamburgers . Unlike the machineries , which is the fixed cost , which is hardly to change one from another since of their value and less movable ' as compared to the raw materials

The corresponding whereas the annual cost of fixed costs , it is equal to 9000 and the annual cost of variable...