Fixed or Variable Cost Essay -- cost, business,

Cost send word be divided into fixed and varying and by considering into fact that fixed and multivariate cost can be unarguably split into two, even though they behave differently based on the level of sales of volumes. Since, cost is apply in every field to determine the price of an item and the unit sold. Two of the main components of cost are fixed and variable cost and is employ to differentiate between the costs that have no direct correlation to business and those that do. Definition-Fixed cost is not affected by the changes in the sales, they have slight relationship to the business and they do not change considerably when the sale increase or decrease. Fixed cost is set for specific period of time and changes occur during the specific time. Since, fixed cost does not change directly about of the examples of fixed cost are insurance premium, true estate taxes etc. For example, an increase in the cost of insurance premiums may be attributable to an insurance companys perception of increased encounter associated with higher volume. Even though the increase in insurance cost is somehow related to an increase in volume, the cost of insurance is still considered a fixed cost (Tiffin, 2007). Other component of cost is variable cost changes frequently do not haves specific set period. Variable costs can be aptly defined as, which increase directly in proportion to the level of sales in dollars or units sold. Depending on the type of business, some examples would be cost of goods sold, sales commissions, shipping charges, delivery charges, and costs of direct materials or supplies, wages of part-time or temporary employees, and sales or output signal bonuses. Both fixed and variable cost elements are components of mixed or semi-vari... ...the equation for a straight line as followsY = $3,400 + $0.80X Hence the above example shows that costs can be determined as either fixed or variable even in a semi variable cost.In conclusion cost can be divide d into two to find the exact amount of sale of an item sold and purchased by the customer. wholly fixed cost can be variable cost since, variable cost change often. Reference Tiffin, R., (2007) Finance and explanation Desktop Guide Accounting Literacy for the Non-financial Manager 2nd ed., London Thorogood. Hansen, D., Mowen, M., & Guan, L., Cost Management Accounting & Control 6th ed., Mason, Ohio South-WesternDittmer, P. & Keefe, D., (2009) Principles of Food, Beverage and Labor Cost Controls 9th ed., Hoboken, N.J John Wiley & Sons, Inc. (US).Weetman, P. (2006) Management Accounting, FT/ apprentice Hall (Pearson Education)