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Management of costs.
Member rating: No Rating | Words: | Submitted: Thu Mar 18 2004
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Management of costs Fixed costs are the expenses that do not alter in relation to changes in demand or output (in the short term). They have to be paid whether the business trades or not. Examples are rent, depreciation and interest charges. Variable cost is the cost that varies in direct proportion to changes in output, such as raw materials, components, piece-rate labour and energy used in production. In other words, these are costs that should double if output doubles. Although break-even charts require the assumption that some costs vary in direct proportion to changes in output, in practice it is unlikely that any costs will be totally variable. For instance, raw materials are likely to cost less per unit when buying in bulk. Therefore the materials cost might not quite double when output doubles. Examples of variable costs are materials, labour e.t.c. Semi-variable costs are costs that vary with output, but...
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