Unit 3: Investigating Finance Control | | | By: Harmol Sehmi 11H1 | | Contents Page 1. Front Page 2. Contents page 3. Introduction 4. Business Costs 5. Carrying on Business costs 6. Carrying on Business Costs 7. Cash flow forecasts 8. Financial documents 9. Carrying on financial documents 10. Carrying on financial documents 11. Managing business finances 12. Managing business finances Introduction In this assignment I will summarise the difference between start-up and running costs, which will include a table showing these. Along with, summarising the difference between fixed and variable costs which will also including a table showing these. I will then write a …show more content…
As well as something that doesn’t change in regards to output. A car manufacturer has to pay heating bills whether it sells one car a day or a hundred. Fixed costs are also called indirect costs. Though, variable costs are called direct costs. This is because they are incurred once a business is operating. This time the amount spent directly relates to the number of products sold or the amount of
Explain how basic cost statements and standard costs are used in your workplace, explaining their purpose and nature and how they are used to control cost
Unlike fixed cost variable cost you have some room to play, variable cost is all about changing inputs around to change output. Or as defined by Thomas and Maurice “variable input is one for which the level of
cognizant of the fact that the choices he makes can affect the price a buyer pays
SIGNature 's pays of its creditor within a month in 28 days this good for keeping a good relationship with their suppliers, because the suppliers will trust them to pay them back and the business could afford to ask for an extension from them if they need it because of the trust.
Variable costs –Variable costs is costs that changes depending the amount of the level of output or sales by the business.
This is because even when the company is not producing any output, it pays the rent, security and the wedges for the permanently employed workers. The direct costs are those that are in direct concern with the production of the output like the cost of the raw material, direct labor and the containers. These costs will change directly proportional to the volumes of the output (Kukla, 2012).
Fixed costs are defined as goods that shall not change overtime; it will continue to be the same price through a period of time, it may increase or decrease upon renewal times. An example that could be provide as below Rent with all-inclusive
Fixed cost or expense are variables that are not effected by the change in production or sales. A variable cost or expense is effected directly by a change in production volume or sales. We will categorize our Fixed and variable cost and expenses. First, we have variable data: executive salaries, insurance and property taxes. These items are located on schedule 7 of our Excel analysis. Second we have fixed variables, raw material direct labor, and inventory.
Fixed costs are constant and have an impact towards profits despite the number of items sold. Reducing the fixed cost amounts is a sustainable way to make more profits and increase operating leverage (Edmonds & Tsay & Olds). Suggested by Reiss, outsourcing is a way of turning fixed costs into variable costs. Variable costs have a dependence of cost based on production or sale of the product (Reiss, 2010).
Product costs or variable costs are all such costs that form part of the inventory. The product cost is the cost of all the different components which make up the product. This may either be the purchase price if the components are bought from outside suppliers, or the combined cost of materials and manufacturing processes if the component is made in-house. Period costs or fixed costs are all such costs that are not incurred in connection to the production. Period expenses are those which occur during a period of time and cannot be easily associated with products or the production process. Period expenses are those for selling and administrative functions – as opposed to manufacturing functions. Examples of period expenses include rent, interest, taxes, sales salaries, etc. Rent on a factory, for instance is constant for a period regardless of how many units were produced in that factory.
The connecting link is fixed and variable costs this influence the budget formed by the flexible variables. The variable expenses comprise of those business-operating expenses with altering the changeable pricing. These expenses usually modify the relationship of the products or services. For example, an increase in merchandise demand impulsively raises the work and resources costs. For example, heavy rain means more business for lawn services though higher costs for work and gas.
Fixed costs consist of items such as rent, insurance, and lease payments. Variable costs change in relation to a company's activities; this holds true for manufacturers. Typical variable costs include direct labor, direct materials, supplies, and certain utilities. The fixed costs and variable costs form a firm's cost to manufacture its products and make up its cost structure (Pondent, 2012). This impacts its profitability.
All the costs by a company can be broken into two categories, fixed costs and variable costs. Costs that are independent of output are called fixed costs. Fixed costs remain constant throughout the relevant range and are usually considered sunk for the relevant range. Buildings and machinery are included inputs that cannot be adjusted in the short term. They are only fixed in relation to the quantity of production for a certain time period. The cost of all inputs is variable, in the long run.
Fixed costs are those which do not change with the level of activity within the relevant range. These costs will incur even if no units are produced. For example rent expense, straight-line depreciation expense, etc.