Question

There are certain costs which are neither fixed nor variable. Justify the statement ​

Answer 1

Answer:

Fixed cost vs variable cost is the difference in categorizing business costs as either static or fluctuating when there is a change in the activity and sales volume. Fixed cost includes expenses that remain constant for a period of time irrespective of the level of outputs, like rent, salaries, and loan payments, while variable costs are expenses that change directly and proportionally to the changes in business activity level or volume, like direct labor, taxes, and operational expenses.

Explanation:

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Answer 2

Answer:

• Fixed, Variable and Semi-Variable Cost

• Fixed, Variable and Semi-Variable CostAs is true for every system in the world, the cost is subject to change as the factors that it depends on change. This gives rise to the concept of variable cost. In the following section, we will see what we mean by variable cost, fixed and semi-variable cost. We will also focus on solving some questions from the concepts of variable cost etc.

• Variable Cost

• Variable CostThese are the costs that vary as the total cost to the organization when the output (number of items or services produced by the unit/business) varies. In other words, we say that a variable cost varies in exactly the same proportion as the output varies

• Variable CostThese are the costs that vary as the total cost to the organization when the output (number of items or services produced by the unit/business) varies. In other words, we say that a variable cost varies in exactly the same proportion as the output variesTherefore, as sales increase the variable costs will increase. For example, a variable cost for a bakery would be the cost of the flour. Similarly, in other businesses, the variable cost will be determined by the raw materials and the output of the business. For example, with massage therapy, oil may be used and there may be the cost of laundering one or two towels. This will constitute the variable cost.

• Variable CostThese are the costs that vary as the total cost to the organization when the output (number of items or services produced by the unit/business) varies. In other words, we say that a variable cost varies in exactly the same proportion as the output variesTherefore, as sales increase the variable costs will increase. For example, a variable cost for a bakery would be the cost of the flour. Similarly, in other businesses, the variable cost will be determined by the raw materials and the output of the business. For example, with massage therapy, oil may be used and there may be the cost of laundering one or two towels. This will constitute the variable cost.Thus we see that the variable costs are those costs which vary directly in proportion to change in the volume of production/output. Hence we can say that the cost which changes in the same proportion as the units produced, is the variable cost. Some of the examples of variable cost are direct expenses, direct labour, direct material etc.

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