Question
I need to provide a response to this discussion: According to a study on corporatefinanceinstitue.com variable cost are costs that vary, and the change depends
I need to provide a response to this discussion:
According to a study on corporatefinanceinstitue.com variable cost are costs that vary, and the change depends on the company's production volume. Some variable cost examples are labor rate, supplies, commissions, and fees. On the contrary fixed cost does not change in relation to production volume. Insurance, utility bills, salaries, and loan repayments are examples of fixed cost. As a business owner it is important to understand fixed and variable cost to make better decision on saving and spending habits. Knowing your expenses and being able to manage the business financial will really set your business for success. I believe that both Fixed and variable cost can be detrimental to a business if they are not managed right because both is needed in the financial business structure. Variable can put your business financially behind if it does not manage right, you can't overspend on labor if what you are putting the labor on is not going to be profitable. Fixed cost can also be detrimental to a business if there is not enough revenue, for example it is easy to be behind on rent if you are making enough to cover the rent. Managing your fixed and variable cost will set your business for success.
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