Fixed And Variable Cost
Introduction
There are two different categories for cost; they are either classified as fixed costs or variable costs. These costs also behave differently based on the level of sales volumes. I am running a restaurant and have identified certain costs along with the number of annual units sold of 1,000. I also wondered if I was to increase the sales volume to 6,000 units and then to 8,000 units the following year would it change the annual cost and unit cost for each?
One cost is raw materials with a total annual cost of $650 and the other cost is building rent with a total annual cost of $9,000. I will explain which one of these costs is fixed and which one is the variable. Then I will provide the cost per unit for each and along with that provide the total annual and unit costs of each when the sales volume increases. Following that I conclude with my own thoughts and views.
Fixed Cost and Variable Cost
The building rent cost is the fixed cost. Reason being is......
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