6 Explain the Difference Between Fixed and Variable Costs
It is based on the distinction between fixed and variable costs. Another example of mixed or semi-variable cost is electricity bill. Fixed Cost Vs Variable Cost Top 9 Best Differences Infographics A variable cost is a type of cost that changes when there is a rise and fall in a companys production volume. . Fixed costs are ignored and only variable costs are taken into consideration for determining the cost of products and value of work in progress and finished goods. Why Is It Important to Distinguish Between Fixed Costs and Variable Costs. The firms annual sales are 400000. Variable costs change based on the amount of output produced. A fixed cost is a cost that remains constant in total regardless of changes in the level of the activity. For example if your average annual fixed costs are 60000 the average per unit sales price is 5 and the average per unit variable cost is 280 you will need to 136365 in gross sales. ...