Excerpt from Term Paper:
variable and fixed costs?
There are several differences between ‘fixed costs’, and ‘variable costs’. Although variable costs are those that can be varied according to the changes taking place, set costs are those costs of purchase goods used by the firm or business, with the concept that it would be through wearing them out by the production of products or by services available that they can ultimately be restored, in the long lasting. (Fixed and variable costs: William-King) Which means that the basic lesson for all business people is that almost all entrepreneurs generally have some simple fixed costs that must be paid, no matter how many products they would be offering available, while at the same time, changing costs alter according to the number of products that are being offered for sale. It is through a learned technique of identification and control of all their costs that all entrepreneurs would be able to earn a basic profit for their company, and thereby make success in their chosen discipline. If one example were to be used, it can be said that one Alex runs a shoe shop, and he’d have to pay particular fixed costs, whether or not this individual sells 20 or so pairs, or two hundred pairs of shoes everyday. These costs would be, for instance , mortgage payments, insurance, and so on. Alex would also need to pay his sales people, employ raw material, use electric power, and maintain a listing. (How Can Entrepreneurs Control Costs? )
All these costs would transform every time period, and these kinds of would after that be the variable costs. Fixed costs must absolutely be paid out, and this just might be the reason that they will be known as ‘sunk costs’, because they would be beyond anybody’s control in various points of time during the running from the business. Consequently , while Alex may opt for the number of sales agents that this individual hires, he’d not be able to opt for the amount of rent that he must pay on a monthly basis. The best way, which will almost all business people use, is always to increase their revenue, so that they could possibly reduce the sum of set costs that have been paid every item that was marketed. This is the reason that lots of gas stations, have, over modern times, also become convenience stores, of course, if the business owner would be able to generate more income when you sell more items and thereby boost the volume of his sales, within the same roof structure, then he will probably most definitely do it, so that he may be able to delight in more income from his business. Yet , one must remember the fact that this approach may not function all the time, plus the discerning business owner must always keep an eye on his variable costs. (How Can Business owners Control Costs? )
2 . What are a few examples of fixed and changing costs from the workplace?
It’s true that in an analysis of a business, nearly all the costs from the business is going to fall under both variable or perhaps under set costs. Instances of variable costs in the workplace would more often be the costs from the goods which have been sold, the sales commissions given to the sales staff of the business, shipping expenses, if the product is being shipped anywhere else, the delivery charges that usually vary depending on the distance to get covered, the various costs of materials and supplies, the wages or perhaps salaries that would have to be paid to the employees of the concern, whether they will be part time or perhaps full time staff, and the costs that are incurred by the organization when they give sales commissions or bonus deals as incentives to their staff. However , set costs becoming what they are, seldom vary, and examples of this sort of costs is the rent to be paid, the interest to be paid out on financial obligations, expenses in insurance, costs for the rose or additional equipment, the expenses received for acquiring business licenses, and the incomes to be taken care of certain full time and permanent employees in the company. (Fixed and Changing Costs: Company owners Toolkit)
You will find, in addition to fixed and variable costs, certain costs while
